Defensible?

I found this blurb interesting while glancing through the GAMCO Growth, 9/30/07 report. (Not to pick on Howard Ward or anything.)

As of this writing, the S&P 500 is at about 1500, resulting in a price/earnings (P/E) multiple of 15.8 times the ’07 estimate and 14.9 times the ’08 estimate. These numbers have changed a little for the better in the past 3 months and are close to the long term average P/E. Barring a recession, stock valuations appear quite defensible.

So what happened? The P/E hasn't changed that much, but evidently earnings have been crushed falling far short of the estimates.