I don't know if the S&P is overvalued or not. However, comparing the index to the historical averages doesn't really mean much to me. In the last 10 - 20 years the economy and society have changed significantly. There are large numbers of compaines that are now major corporations that could not have existed 20 years ago (PC, wireless, internet hardware, internet supplies etc). The technology markets are changing the playing field. While this does not change the business fundementals it does change the amount of resources neede to generate a profit and potentially the value of a company.

Also and I think more important is the amuont of money invested in the market. Far more people and far more money are being put into the market. Depsite the new companies being added the increase in investment dollars has far outstriped the investment options. This will drive up the price for the same stock due to supply and demand. With this in mind I don't see the higher PE ratios to be as major a problem as some of the analysts make it out to be. I may be totally wrong and I am sure some of the wiser individuals on this board will hapily point out the flaw in my thinking. But until someone can show me that past performance quarentees future succes I am not ging to worry that the PE's are at historical highs.