Earnings Are Figment Of Accountants' Imaginations. Exiting Equity Would Be A Mistake

The same dynamic plays out today. Earnings quality varies across sectors. Technology companies often report high non-GAAP earnings that exclude stock-based compensation. Energy firms face volatile write-downs. Retailers deal with inventory accounting choices. None of this is new. The market has always priced in a discount for low-quality earnings. The S&P 500's free cash flow yield, a more reliable measure, remains above 4%. That level has historically supported valuations even when GAAP earnings looked stretched.

What would confirm the thesis that exiting equities is a mistake? Continued economic growth and rising free cash flow. If companies keep generating cash, the accounting noise matters less. What would weaken it? A sudden loss of confidence in corporate governance or a wave of accounting restatements. Neither is imminent. The SEC has not signaled a crackdown. Auditor independence rules are unchanged.

The better read is to focus on cash flows and balance sheets, not to flee equities entirely. The Seeking Alpha contributor is right to question earnings quality. The conclusion to sell everything is wrong. History says the cost of being early is higher than the cost of being late.