Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.
NEW YORK (TheStreet) -- Is the market too expensive? Should investors be worried? Those were some of he questions Jim Cramer pondered with his Mad Money viewers Monday. The average stock in the S&P 500 is now trading at 18.5 times earnings, which is higher than historical norms. But what, exactly, is "normal" anyway?
The stock market was trading at an average 29 times earnings just before the crash in 1987. Back in the dot com bubble of 2000, the highest of high fliers were trading at 80 and 90 times earnings. Conversely, during times of strong inflation, the market has traded around 12 or 13 times earnings.
When it comes to valuations, it's all relative. Given that stocks have no competition from bonds at the moment, its slightly inflated prices make perfect sense. And rather than looking at "the market," Cramer suggested looking at individual stocks. Is Apple (AAPL) expensive at 14 times earnings with the biggest stock buyback on Earth and a dividend that rivals the five-year treasury? Apple trades at just 12 times earnings when you back out its cash, and that's why Cramer owns Apple for his charitable trust, Action Alerts PLUS.
Gilead Sciences (GILD) has a cure for hepatitis-C, along with a strong balance sheet, a terrific pipeline and plenty of growth, yet it trades at a ridiculous 10 times earnings.
Overall, Cramer thinks the markets are fairly valued, with undervalued areas, some areas in flux, and yes, a few that are indeed, worrisome.
Executive Decision: Manny Chirico
For his "Executive Decision" segment, Cramer checked in with Manny Chirico, chairman and CEO of apparel giant PVH (PVH), which today released strong earnings with raised guidance and a stock buyback program.
Chirico was more upbeat than he's been in recent months, saying his company's investments in Calvin Klein are just now starting to pay off. He was bullish on PVH's prospects in Europe, which is starting to see both sales increases and a boost in gross margins.
Other bright spots for Chirico include denim, a category that is also starting to see sales improvements, with Calvin Klein denim particularly strong. Chirico was also upbeat about sales at both Macy's (M) and Kohl's (KSS) here in the U.S.
Finally, Chirico noted that as an international company, currency pressures are masking his company's true potential, which he noted would be seeing double-digit earnings growth if not for currency issues.