THE NASDAQ may have passed its record high, although like London's FTSE 100 it took its time about doing so; 15 years, to be precise. So much for the mantra that shares are always the best long-term investment; Japan's Nikkei 225 just celebrated its achievement in reaching 20,000, just over half its 1989 peak.

Share are being propped up by the lack of decent alternatives; investors think bonds are overvalued and cash yields zero, or less. They may also worry that shares are overvalued, but while monetary policy remains supportive, they are not worrying too much.

But what is the value of a share? Theory states that is the value of all future cashflows, discounted at the appropriate rate. Estimating those cashflows, and deciding on the right discount rate, is a very difficult task. So investors use rules of thumb - notably the ratio of the share price to past profits (the historic p/e) or, when they are bullish, the ratio to future profits (the prospective p/e). The outlook for profits, one would have thought, is pretty fundemantal. Hence this comment from Citigroup's strategists

the MSCI AC World is trading at a higher PE (18.5x) than its 16.7x peak in October 2007. This is a concern for some, although we would point out the current PE is not especially high compared with the 17x 45 year median. Indeed, global equities have traded at the current PE or higher for 37% (ie 15 years) of the time since 1970

Despite the reassuring message, there are still some concerns if one looks deeper at the Citigroup data. So the global market is 10% above its 2007 high, but earnings per share are basically flat. In the US, the market is around 35% above its 2007 high but earnings per share are up 20%. Revenues per share are pretty much the same as they were in 2007 (as taken from Ed Yardeni's website). Globally, the price-to-sales ratio is back where it was at the 2007 peak.

In other words, companies have squeezed higher margins out of these revenues, investors have awarded these higher margins a higher multiple and all this has pushed share prices higher. So you might think that investors would worry if profits stalled.

Not a bit of it. Andrew Lapthorne of SocGen points out that the trailing earnings of companies in the MSCI World index have fallen 5.5% in dollar terms over the last 12 months, and estimates of 2015 earnings have been cut by 10% since the start of the year (see top chart). Some of this is down to the strong dollar, of course, but even if you allow for that factor, estimates have been cut by 5.3%. Some commentators will then wanted to exclude oil companies as a special factor, but this gets a bit Monty Pythonish (apart from the roads, education and the aquaduct..); if one excludes oil and financials, estimates have still been revised down 3.5%.