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This doesn't mean there are no cheap stocks. Take out the 50 most popular stocks in the S&P 500, and the average P/E of the rest falls to a not-so-scary 18, according to Morgan Stanley. And there are hundreds of smaller stocks with P/Es below their expected rate of earnings growth--a classic sign of value. But the overall market will not be cheap by historic standards unless the S&P falls 40%--or its underlying companies earn far more than analysts project.
See time.com/personal for more on cheap stocks. E-mail Dan at kadlec@time.com See him Tues., 12:40 p.m. E.T., on CNNfn.