He advises "buying this great value (like Buffett) and hanging on". Earnings have dropped from about $94 to $56. Next year, we'll see $40 (says Gary Shilling)... maybe even $30 and a P/E <10x.
Combining your two statements, it appears you are calling for 400 on SPX at some point in '09. Basically, a 55% haircut from current levels. Is that about right?
I'm not in the habit of forecasting any price level, but it seems reasonable... actually significantly lower is reasonable too. Who knows how low earnings will go in a world wide recession? Who knows whether "they" will sell down to 10x P/E. In '82, the P/E got down to about 8... and has been lower at other market lows. IMV, anybody who'd spouting the "value" claim here is exercising "wishful thinking"... might even say, NUTS!!
I don't use "forward earnings"... they are likely bogus... can be any imaginary and fanciful number... I was looking at 12-months trailing as per Standard and Poors data.
Do you think it's reasonable or even possible that earnings might double in the next 12 months given the economic circumstances? That's why "forward earnings" can be any fanciful number... If he had said "forward earnings $40", that would have been credible... but then that wouldn't have supported his claim of "value here"..