Financial charts can generally look good or bad. But sometimes, one comes along that is downright ugly. The Rude Awakening’s Joel Bowman says the earnings chart for the Dow Jones Industrial Average index (.DJI) is particularly sore on the eyes. Earnings were negative in Q208, for the first time ever, giving the index a price-to-earnings ratio of nil. Such losses will heighten deflationary fears, encouraging the government to crank up its inflationary policy. More from Joel…

If any reader, man or woman, attractive or not, is prone to finding himself or herself offended in any way by beauty-challenged financial charts, please do not read on any further.

There. You’ve been warned…

Our friends over at Casey Research alerted us to this rather ugly graphic when it was first published a couple of days back. Here’s what David Galland, managing director and editor of The Casey Report had to say about it.

“Q2 2008 – for the first time ever – the Dow Jones Industrial Average posted quarterly losses instead of earnings. The Dow’s price-to-earnings ratio is now listed as ‘Nil,’ leaving Wall Street without its favorite valuation metric for blue chip companies.

“Citigroup and JP Morgan were pummeled for their subprime investments,” continues David, “but the contagion of the credit crisis affected every balance sheet within The Dow. A couple of standouts amongst the wreckage were AT&T and Verizon, whose net incomes of $4B and $2B, respectively, were offset by huge losses in ‘Investing Activities.’ AT&T reported a loss of $11.3B, and Verizon lost $17.5B.

“These investment write-downs send huge amounts of capital to ‘money heaven,’ tempting some that have pitched a tent in the inflationist camp to wonder if we might be in for a major bout of deflation. But as Doug Casey so compellingly points out, today’s fractional reserve banking system forces the government to pursue an aggressive inflationary agenda. They must continue to push more and more money into the system to maintain the appearance of economic growth, and to cover up the losses of these blundering blue chips.”

Source: A Long View For Short Sellers