Date: July 2012: 20120730_QEPE.png (654×677)

The significantly diminishing multiple-expansion impact from each of the Fed's actions. QE1 created a plus-4x multiple expansion (from ~10 to ~14), QE2 created a plus 1.5x pop in multiples, and Operation Twist around the same. Critically though, as soon as the Fed-sponsored money-supply 'flow' expansion ended, so the P/E multiple-expansion ended (and indeed reversed very quickly). It really is about the flow; and the threat of a crack-addicted market's requirement for perpetual QE.