That measure of value, the PE ratio - how much of the "E" part of the PE does the investor see? Who cares if a company has even a PE ratio of 1 if it pays out only a millionth of its claimed profit? As you see, the PE ratio in terms of how it translates into returns to the investor is a terribly misleading measure of valuation. The rest of the earnings get "reinvested" and you can guess what that means - some persons get their hands on it and the investor is ever so happy to get just a small portion of the actual profit even when they based their investment looking at the PE ratio. I seriously doubt that investors really pay attention to comparing the stated PE to what they actually realize from it. Here's where it gets really interesting...

Economic data should be easy to understand to enable all interested parties to provide a sense of the state of the economy. This becomes even more essential to government leaders for the purpose of economic policy making, for business owners to plan for future changes, for investors to guide them in their investment strategy, and for everyone in general to help determine their monetary involvement in the economy.

Sadly, however, government does not usually provide data for easy consumption. Sometimes what is claimed is under measurement, such as unemployment data, is a far stretch from the truth. Other times, government likes to apply seasonal adjustments to data and puts this out as the headline number and it then becomes an arduous task to locate the non-adjusted data, and oftentimes, the hassle, either perceived without experience or known from past efforts, precludes expending the energy. It is surprising that the actual

As most of us know, the economy is not in as good of shape as the government and the media want us to believe. It's understandable to promote confidence, however, when there is so much propaganda that must be thrown about, the public should be awaken to see that there is a desire to push growth to unsustainable levels.

Our government claims we have a positive GDP growth rate. The media offers no insight into breaking down the numbers and simply thrusts onto the public in whatever the government claims. The GDP growth rate is computed by subtracting the REAL rate of inflation from the nominal GDP growth rate. There are other equivalent formulas but this is more direct, without the use of introducing other terms such as a GDP deflator. The inflation rate that our government conveniently uses is one that excludes the effect of food and energy inflation

If you are a discerning thinker you will notice how the propaganda has been pushed on the public about the United States as being in a recovery, our unemployment rate is under 8%, the GDP growth rate is positive, and stocks are reasonably priced, if not under-valued! Well, I hope to go into each of these topics but knocking one item out at a time, I'll concentrate herein on the overpriced stock market.

So the pundits tell you that the stock market is reasonably priced. The common explanation is in using the average PE ratio for the S&P500. Now, I ask, is today anything at all like "AVERAGE"?

The S&P500 PE values all the way up to 1990 were fairly tame. The arithmetic average of the median yearly PE values for the decades from 1900 to 1990 is about 12.8 (median is 12.6).