Bob Brinker cited high forward operating price to earnings ratios at "almost 30" in 1Q2000 as an important reason behind his call to sell at the time, during the first hour of his radio program yesterday. He continues to like stocks right now because forward p/e ratios are in line with a long term average around 16. You can listen for yourself this week in the seven day archive at ksfo.com by picking Sunday between 1 and 2 pm.
The trouble is, the measure never got much above 25 in the first place, and then flirted with the vicinity of that already in early 1999, a year before Bob sold the market. That suggests that as a timing tool there is considerable elasticity to it in practice, or in Bob's memory. Unfortunately, however, the forward p/e has predicted nothing untoward since, from 2005 to this day, missing the 2008-2009 debacle entirely.
Factset framed things this way, here, in March, where you'll also find a nice chart of forward p/e ratios over time:
"On the other hand, the current forward 12-month P/E ratio is still below the 15-year average (16.0). During the first two years of this time frame (1999 – 2001), the forward 12-month P/E ratio was consistently above 20.0, peaking at around 25.0 at various points in time. With the forward P/E ratio still below the 15-year average and not close to the higher P/E ratios recorded in the early years of this period, one could argue that the index may still be undervalued."
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The p/e based on reported earnings, however, actually did average 32.4 for the ten months between November 1998 and August 1999 inclusive and then fell somewhat by the first quarter of 2000 to an average of 28.4. Perhaps Bob Brinker is thinking of that instead of forward p/e ratios. The p/e ratio from reported earnings is presently above its mean and median levels at 19.6. This measure climbed into the 20s from the October 2007 high into the crash in September/October 2008.
That said, the forward ratio of 25 by itself admittedly looks extreme in its historical context, and current forward estimates close to 16 are arguably at a minimum indicating that stocks are not yet frothy.
