Get Out and Stay Out -- of the Market!

After the market's stumble, now might be a good time to scoop up some bargains -- but only for the short term. More bad times could be headed toward Wall Street.

Right now, the Dow and S&P 500 are down 2% year to date, but corporate earnings are up. According to Thomson Reuters, 80% of companies in the S&P 500 handily beat consensus first-quarter estimates by analysts who were already bullish, and Wall Street's predicting better growth ahead. Alcoa (NYSE: AA) is expected to grow earnings 183% this year, while Caterpillar (NYSE: CAT) is expected to be up 45%.

As we've been schooled, a stock's price follows its earnings. Analysts predict that companies in the S&P 500 will grow profits by 33% on average in 2010, a much rosier outlook compared to the 9% drop they were forecasting back in January. And with those same companies trading at less than 13 times estimates -- below the historical average of 15 times -- this certainly looks like a buying opportunity.

Look at the performances of several top companies:

Source: Yahoo! Finance; NC = not calculable; Ford's 2009 EPS = $0.00; 2010 EPS Est. = $1.27.

Since the market tends to look forward rather than backward, this looks like a buyer's market. But looks can be deceiving.

If you go a little bit further out to the first quarter of 2011, analysts are reining in their enthusiasm. Thomson Reuters says analysts are significantly cutting back their estimates, expecting earnings to grow by just 13% compared to their forecasts of 25% back in March. And full-year 2011 projections are about half of what they are for this year.

Don't walk away, run!
There's a whole bunch of stuff about to go wrong, leaving us likely poised on the brink of a double-dip recession. Consider some of these as signs of a new, worldwide calamity.

• Job growth here at home has stagnated.
• States like California, Nevada, and New York are also going on austerity diets, but the potential for default remains high.
• Banks aren't lending to business, finding it cheaper -- and more profitable -- to lend to the U.S. government.
• Greece's default was averted -- but only until its current set of loans come due.
• Spain is wobbling and may be the next in line for a bailout.
• Austerity budgets are being implemented all across Europe.
• China's real estate bubble may have just burst.

There's more, too, but you get the picture. Suffice to say the prognosis for growth is dreary. However, the timing of the coming crash is difficult to predict.

Hoarding nuts for winter
According to the Federal Reserve, U.S. corporations are sitting atop a pile of cash and liquid assets larger than any previously recorded, with $1.84 trillion in the bank. If they release that money back into the market, it could have a profound effect on results. Right now, however, they prefer to squirrel it away.

Although I'm bearish about our immediate future, I'm ultimately a long-term bull. A decade to 15 years down the road, I see corporate earnings coming in at higher levels than where they stand today. Although it smacks of market timing, investors need to assess whether today's prices are a good value. Buying in now might still give you profits in the long term, but I think there will be greater profits made by using caution.