In this article, written by the legendary Ben Graham in the spring of 1960, Graham warns of the unusually high valuation metrics in the early months of 1960. The article is based on a talk he gave on December 17, 1959. Graham writes about the high multiples like p/e, and the article is somewhat similar to the valuation arguments you hear today. Graham warns that there might be danger ahead.
In the first nine months of 1960, the market declined by about 15%. But after that it rallied by 26% through the end of 1961. From there, equities entered a bear market through the end of June of 1962 falling 23% and down 17% from their high at the end of 1959. After that, the market would rally through 1965.
Before the bear market began, some stocks like Texas Instruments and Polaroid were trading at p/e ratios of 115 times. The bear market even included a “flash” crash on May 28, 1962 where many stocks dropped 5 to 10% within minutes. The Dow fell 5.7% on that day.