Forward earnings estimation is increasingly in error

This chart courtesy of  James Bianco.  When we look at the gains from trade, consumer prices relative to cost of production we see all the new gains coming from consumer inflation, but producer prices are held in check. However, the last three months have shown decreasing inflation, especially the last month which showed a month of negative consumer prices change. Forward earnings have been cut effectively in half. So, if the Bull wisdom is correct, pe ratios should nearly double, a clear impossibility I would think.