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I said: "the historic stock market cap to earnings ratio is is at .5"

You said: "Could you please given me a reference where this number is derived?"

Sure. Post 10 has:

36 posted on 10/26/2009 9:58:48 AM PDT by Forgiven_Sinner (For God so loved the world, that He gave His only Son that whosoever believes in Him should not die)

I think I understand now where the disconnect lies. The chart uses the capitalization of PUBLICly traded companies and divides it by the GDP of the entire nation. Well, in a nation, only a portion of the companies that contribute to GDP are public. Think of all the laudromats, fast food franchises, small hotels and motels you drive by. They all contribute to the GDP but PRIVATEly owned.

The ration on on the chart is therefore NOT a P/E ratio. To arrive at such, they should divide not by the GDP of U.S. but by the sum of all the earnings of NYSE+NASDAQ.

Make sense?