DOW P/E Reaches Insane Heights

Update: The below comparison seems to be in error... the "Dow industrials" average linked is not the same as the DJIA headline index; it is a separate industrials index. However the conclusion that the market is "still expensive" is in our opinion very true.

Think the market is in the doldrums? You wouldn't know it by its price, given by the vaunted P/E ratio, the most basic stock valuation metric. The Dow's P/E is now just a hair under 54. A reader writes in more about this:

Yes, it is due to failing earnings. As you know, P/E is the actual price of a stock since it is normalized to an otherwise arbitrary share price. Generally any index P/E over 25 is considered a flashing warning light. Some perspective:

In 1929 the Dow P/E was 32.6

In 1932 it was 5.6 which is the lowest ever recorded

In 1966 the Dow P/E was 24.1

In 1982 the Dow was the same price as 1966 but with a P/E of only 7

In 1987 the Dow P/E crashed from 18.3 to 13.4

In 1999 the Dow P/E spiked to 44.2