"Fast, cheap and out of control" isn't just the name of a recent documentary. It's also a pretty good description of the stock market.But just

how

cheap is the subject of a heated debate on Wall Street.

The bulls, of course, contend the market is dirt cheap after a 28-monthshellacking. Nonsense, say bears, who note price-to-earnings ratios remainmuch higher than the historic average of around 14, no matter how they're measured.

History seems to be on the side of the skeptics, as the table thatfollows suggests. The bottom line is that trailing P/Es for the

S&P 500

are significantly higher today than at any of a number of significant marketbottoms in the 20th century.

Treasury yields -- to which the relative valueof stocks is compared -- are currently lower now than in several morerecent episodes. But today's yields aren't nearly as far below the averageof past bottoms as current P/Es are above their comparable average.

The data used for the table below were culled from the Web site of

RobertShiller, Yale economics professor and author of

IrrationalExuberance

. The historic Treasury-note yields come from the

FederalReserve.

The relevant dates come from a recent report by GNI Capital, arelatively small ($20 million) hedge fund in New York, which sought tocompare past market junctures to the current environment.

Most prior market lows occurred during economic recessions, GNI found,which isn't surprising, given the stock market generally bottoms ahead of anupturn in earnings as investors discount the future recovery.

Notably, we're not in a recession currently, meaning either it'sdifferent this time or maybe the stock market's recent swoon is telling us what's coming for the economy, as discussed

last week.

The Great Debate

The above data sparked a torrent of emails when I posted them yesterdayin

RealMoney.com's

Columnist Conversation. Several readers suggestedcomparing current P/Es with historical levels is a fruitless exercise, giventhe differences not just in bond yields but in inflation rates, dividendpayout levels, and general market action. Additionally, the composition ofthe S&P 500 has changed dramatically over the years. Then there's theoverriding question of how, exactly, we're supposed to be measuringearnings these days.

Earlier this week, Richard Berntstein, chief strategist at MerrillLynch, suggested the "variability

and unpredictability" of earnings is "more important when determining the current market's valuation than are interest rates and inflation."

In addition to the cycles for the economy and corporate earnings,variables in the current equation include the debate over reported vs."core" earnings, the potential wave of restatements when the Aug. 14sign-off date arrives, and whether options should be treated as an expense.

For those reasons, Brad Ruderman, managing partner at RCM Partners, a Los Angeles-based hedge fund with about $100 million under management,agreed the "What's the 'E'?" question is the crucial one facing investors today.

Additionally, he noted that past P/E troughs coincided with "one-off" events such as bad policy decisions in the 1930s and the oil embargo of the 1970s. Thus, comparing current P/Es to historic levels doesn't necessarily assist investors today.

"One can always make an academic argument for both sides," of thebull/bear debate, Ruderman said. "What serves us well is buying undervaluedbusinesses after extreme selloffs and selling rallies."

RCM has recently reined in short positions previously focused inconsumer names such as

Kohl's

(KSS) - Get Report

,

Wal-Mart

(WMT) - Get Report

and

Tiffany's

(TIF) - Get Report

.

The fund has been buying media companies such as

Disney

(DIS) - Get Report

,

Viacom

(VIA) - Get Report

and

Rainbow Media Group

(RMG) - Get Report

.

Ruderman, who declined to discuss the fund's performance, alsomaintains the bullish stance on cable stocks

detailed here in May, despite the recent drubbing thegroup has taken. "They've been clobbered by guilt by association with

Adelphia

and EBIDTA but we've been buying more as they're down," hesaid. "We think cable is one area where you have pricing power."

GNI Capital's Allen Gillespie, who authored the firm's report, reached a conclusion similar to Ruderman's about interpreting current P/Es vs. pastbottoms.

The

Nasdaq Composite

and the Dow Jones Utility Index have gonethrough bear markets akin to the

Dow Industrials

in 1929-32,Gillespie said. "But that doesn't mean the whole list will do that."

Gillespie argued names such as

J.P. Morgan Chase

(JPM) - Get Report

,

Citigroup

(C) - Get Report

, and

Duke Energy

(DUK) - Get Report

are trading at attractive levels based on P/E and/or book value.

"These are names that have a lot of fleas but unless you thinkthey're bankruptcies, it's harder to stay short," he said.

GNI, which was up 15.9% year to date through Monday, has been trading in and out of those names lately but had no positions as of Tuesday'sclose.

"I think we're in a situation where earnings have quit declining, which makes the real bearish case much tougher," he said. "That doesn't meanwe're going to have a great bull market, but if earnings continue to lift, the big bearish bet has to be taken off the table."

Continued improvements in corporate profitability is, of course, the big "if."

More Notes and Notables

Finally, the historic P/Es cited in the table above conflict with the message of money manager Ken Fisher's

recent column in

Forbes

, in which he argued: "Correctly calculated, the market's highest P/Es ever were in 1920, 1932 and 1982."

Fisher, however, didn't specify what "correctly calculated" means orwhat the specific P/Es were in those eras.

The notion that P/Es would be extremely high at market bottoms makes sense when you consider earnings were at a nadir at those junctures. "The market's P/E usually is higher at a bear market bottom than its prior peak, because as a rule, earnings disappear faster than stock prices," Fisherwrote.

However, he also wrote: "History shows there is simply nothing about P/E levels, cut any way you want, to help predict market tops or bottoms, or market levels several years out. That we believe otherwise ismythology."

That supports the conclusions of sources queried for this article and seemingly undermines the point of Fisher's, as well as his

recently adopted bullish stance.

The fund manager's office did not return multiple phone calls seeking comment on Tuesday.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.