The fact that corporate profits are strong and growing doesn't mean the stock market isn't in a bubble.

That's worth emphasizing because many of Wall Street's cheerleaders are arguing we can't be in a bubble if corporations are as profitable as they are. But these bull-market apologists are laboring under a fundamental misunderstanding of bubbles: They don't trace to weak earnings per se, but to how far ahead of those earnings the market rises.

In other words, strong earnings growth doesn't protect the stock market from being in a bubble. Just take the top of the internet bubble: The S&P 500's SPX earnings per share had grown 32.8% over the trailing 12 months, and 8.9% annualized over the trailing decade. But the internet bubble burst anyway.

The most well-known measure of where the market stands relative to earnings is the price/earnings ratio, and this ratio (based on forecasted 12-month earnings per share) is higher today than in any other time in U.S. history except for one month: March 2000 - the month the internet bubble burst.

I need not remind you how poorly the stock market performed subsequent to its record high level in early 2000. Over the following 12 months, the S&P 500's total return index lagged behind inflation by 19.2%. Over the subsequent five years, that index produced a real return of negative 4.6% annualized; over the subsequent 10 years, its real return was negative 2.8% annualized. While March 2000's experience constitutes just one data point, it is consistent with the historical pattern: High P/E ratios are correlated with lower subsequent returns, on average, and vice versa.

A similar story is told by an alternate measure of the market's level relative to earnings. I am referring to the Cyclically-Adjusted Price/Earnings ratio, or CAPE. Instead of dividing prices by estimated forward 12-month earnings, it divides them by average inflation-adjusted earnings over the trailing 10 years. Made famous by Yale University finance professor Robert Shiller, the CAPE smooths out cyclical fluctuations in earnings and focuses on the underlying long-term trend. The current CAPE ratio - very close to 40 - is higher than at any time in U.S. history, other than a few months in 1999 and 2000 - when the internet bubble was most inflated.

Status of other valuation indicators

The same message is being told by virtually all valuation measures with statistically significant track records when forecasting the stock market's future returns. The table below, which is updated monthly in this space, lists eight such indicators besides the two mentioned above. A 100% reading in the table means the stock market is more overvalued than at prior times in U.S. history; the average reading in the table below is 98.3.

In the face of such overwhelming overvaluation, the bulls have no real support for this bull market other than "this time is different." Those are the four most dangerous words on Wall Street.