Stocks to rally following writedowns?

Bloomberg has a report today saying that it may be about time to buy stocks.

Just when U.S. companies are about to report their biggest writedowns, the losses may be the strongest signal yet that it’s time to buy stocks.

Companies in the Standard & Poor’s 500 Index are marking down assets at the fastest rate in six years, leaving operating profits 46 percent higher than net income in the third quarter, a level last seen in 2003 when the previous bull market began...

A widening gap heralded the end of the dot-com crash. S&P 500 operating earnings exceeded net profit by 67 percent in the final three months of 2002, a period when stocks dropped to the lowest level since 1997. The index then doubled through October of last year.

The article isn't very accurate in its account though.

The quarterly gap between operating and net profit for S&P 500 companies was widest in 2001 during the recession. That didn't herald the end of the bear market.

The gap for the four-quarter rolling average, which the accompanying graphic depicted, continued to widen after that. Stocks continued to fall.

The four-quarter gap was widest at the end of 2002. That did finally herald the end of the bear market, but this was about a year after the end of the recession.

The last time I checked, the economy is still in recession.