S&P500 Earnings quite low- basically there are none.

This is not from Grantham, but basis real earnings, not all the hogwash purported by CNBC, real PE is 723. Not 14, not 29, not 100, but 723. That's off all the companies reporting thus far. This is from addition of all the 10k's. So Grantham's comments below are quite the massive understatement. Green shoots and overshoots GMO's Grantham warns of overpriced stocks and scarce natural resources By Jonathan Burton, MarketWatch SAN FRANCISCO (MarketWatch) -- The sharp rally in you.S. stocks is giving one well-regarded investor more than a moment's hesitation. Jeremy Grantham, chief investment strategist at Boston-based institutional money manager GMO, encouraged investors to take more risk when the Standard & Poor's 500 stock-index /quotes/comstock/21z!i1:in\x (SPX 979.62, -2.56, -0.26%) slipped below 700 back in the dark days of early March. At the time, he pegged the S&P's fair value at about 900. Not quite five months later, the you.S. market benchmark has blown through 900 and seems on its way to 1000 or even 1100. So Grantham has some new investment advice: Take some money off the table and make sure that what remains in you.S. stocks is committed to the highest-quality companies. "It was not so easy reinvesting when terrified, but most of us knew that we should have been doing more," Grantham wrote in a quarterly report to GMO clients, published Monday. "Today? It's difficult to be inspired at fair value." High-quality rules Stocks have come too far, too fast, Grantham said. The market's recent surge is at best speculative and not likely to carry investors much farther, he said. "Given our view that we are in for seven lean years in which the market will be looking for an excuse to be cheap, we recommend taking some risk units off the table," Grantham wrote. This includes lightening up on stocks until the S&P falls back to fair value, which he still pegs at around 880. The speculative, lower-quality rally took a toll on you.S. blue-chip stocks, Grantham said, and the bulls have been misled. "I understand a rally in junk after the record decline, but this was excessive and based apparently on unrealistic hopes for a strong, sustained economic recovery," Grantham said. Instead, Grantham envisions a weaker rebound -- and not until late this year or early next. That scenario favors quality -- specifically companies that can deliver earnings and are less reliant on capital markets to thrive. "Without an unexpectedly strong improvement in the economy, it is hard to see high quality stocks losing much more ground," Grantham said. "If our numbers are correct," he said, "long quality (or long quality and short junk) is substantially the most outlying bet available today in all global equities."

Reported 10 month earnings are utterly irrelevant. That's like driving not looking in the rear view mirror, but looking at a map of where you've been. The reason the market fell in 07 and 08 is because of those earnings. Every manager worth his salt knew that he could get away with any and every loss in the last quarters of 08, too, so they took them. Why? So comparisons will be easier this year. Earnings are managed, my Boy, now more than ever. In fact, I'll predict that the market is going to run into real trouble right as earnings start looking pretty good. Earnings are nowhere near as important as liquidity. Watch the punchbowl. MSY

Reported 10 month earnings are utterly irrelevant. That's like driving not looking in the rear view mirror, but looking at a map of where you've been.

The reason the market fell in 07 and 08 is because of those earnings. Every manager worth his salt knew that he could get away with any and every loss in the last quarters of 08, too, so they took them.

Why? So comparisons will be easier this year. Earnings are managed, my Boy, now more than ever.

In fact, I'll predict that the market is going to run into real trouble right as earnings start looking pretty good.

Earnings are nowhere near as important as liquidity. Watch the punchbowl.

MSY

Your correct Mark for the IT you can spike the punch bowl and you have a nice party for a while but you got to keep the other eye on the legs of the table they are still a bit loose.

Z

BTW, not 10, but 12. Tempus fugit, but not that fast!