Second most extreme

The PE (price-earnings) ratio has a stock-prices metric in the numerator and a measure of corporate profits (earnings) in the denominator.

There was an unusual situation in 2009 when stocks were rising in anticipation of a recovery from the Great Recession. The recession had caused profits to tank, so the denominator was very low for a while. The rising numerator caused the ratio to go to 124, an historical outlier.

Otherwise, the PE ratio has a median around 15 and an historical minimum at around 5. If it goes above 20 that’s considered really high. It’s only gone above 45 twice . . . that special outlier time in 2009 and now.

So we have the second highest PE ratio in history. It means stock prices are egregiously beyond what earnings indicate they should be.

According to a simple “buy low, sell high” investing strategy: People are nuts to buy stocks at the current over-valued, over-extended levels.