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"Companies have shocked the market with their earnings strength this year," he said, "and we believe that there is still significant room to grow".
In the long run, it is the financial and earnings strength of companies that matters, not whether they are paying dividends or buying back shares.
But if you take a deeper look at the numbers, it looks like Google's earnings strength has more to do with cost-cutting than with revenue growth.
By contrast, GM's earnings strength came from selling cars in Asia (where Ford is weak) and from other overseas markets (with the exception of Europe, where GM lost $506 million).
So what drove the earnings strength in the 2Q, and is it sustainable?
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The company's relative earnings strength--in a period when earnings of most major tech companies are falling--has helped lift its stock.
JPMORGAN EARNINGS SHOW STRENGTH | JPMorgan Chase said on Friday that its first-quarter profit rose 33 percent to $6.5 billion, supported by strength in the investment banking business and a surge in mortgage lending.
"In other words, the 'beat' came on core earnings power strength rather than just lower credit costs," he wrote.
Ratios above one indicate earnings quality strength; below one earnings quality weakness.
Essentially, we're doing basic math: forecasting earnings, financial strength and management execution.
Morgan Stanley said profits fell for the seventh straight quarter amid the stock market slump, but Wall Street rival Bear Stearns posted a rise in earnings on strength in its bond business.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com