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A version of this post first appeared in The Felder Report PREMIUM.

We are now entering earnings season once again. Pre-announcements have been the second-worst seen over the past decade.

This has analysts lowering estimates. In fact, they’ve been lowered so far quarterly earnings now look to fall all the way back to 2009 levels.

For the trailing twelve months earnings are now back to 2011 levels…

…even while stocks remain 75% above their own levels from back then. Taken together you get a price-to-earnings ratio of 24, higher than any other time over the past several years.

It should go without saying that extreme valuations and falling earnings are not a bullish recipe for stocks.

So the fundamentals are not supportive of higher prices. What then has been driving them higher in recent weeks?

And the greater fools are none other than the companies themselves…

…for now. If earnings don’t turn around soon (and corporate spreads narrow), it’s going to be hard to maintain the current pace of buyback activity.

Just by glancing at the chart above it’s easy to see that companies have been the greatest fools of recent market cycles, expanding their buyback activity at the highest valuations and reducing them during the most attractive ones, hardly a legitimate theory of investment value. This cycle appears to be no different.