Kass: Dry Your Tears With Cold Hard Cash

This blog post originally appeared on RealMoney Silver on Jan. 3 at 8:01 a.m. EST.

Reported S&P 500 profits will likely be slightly negative this year, thanks to some large charges at General Motors (GM Quote) and the multiple blunders at a number of misguided and gluttonous financial institutions.

The modest 2007 rise in the S&P 500 of under 4% has resulted in a P/E multiple of approximately 18 times trailing 12-month earnings as of Dec. 31, 2007. If one takes out the still-low P/E multiple associated with energy stocks of about 12 times, the non-oil S&P trailing 12-month multiple rises to 19 times, above its historic average.

Lost in the analysis of 2007's equity performance has been the P/E multiple expansion in the equity market, after one excludes financial stocks. Indeed, without the financials, the S&P would have had a low double-digit return....