One of the most common numbers you hear if you listen to stock forecasts is the "P/E ratio"--the price of the stock or market relative to the company's earnings.

Sometimes, the P/E ratio can be very useful for getting a sense of whether a stock or market is cheap or expensive.

At other times, however, the number can be highly misleading.

One of the most common ways the P/E ratio can be misused, for example, is when investors cite the P/E of a small, rapidly growing company that currently has a low (or no) profit margin. In these cases, the company will often have an astronomically high P/E on its historical earnings, which can lead some investors to conclude that it is "ridiculously priced."

What these investors often don't realize, however, is that stocks trade based on future earnings expectations, not past earnings, and the company's earnings might be expected to grow extremely rapidly in the future. Investors who are looking at the stock's price relative to possible future

Many market strategists credit the Federal Reserve with the rally that has pushed the Dow and the S&P 500 to record highs.

The near-zero interest rate policy of the U.S. central bank coupled with millions of dollars worth of asset purchases monthly has essentially swelled liquidity in the market, and those funds have to find a home.

With the 10-year Treasury yield well under 2% and an economy in (a sluggish) recovery, investors have been pouring money into the U.S. stock market.

The Fed may have been the catalyst for the start of the stock rally but, according to Mohamed El-Erian, CEO of Pimco which runs the world’s largest mutual fund, “the latest surge is really not on the back of the Fed but the Bank of Japan.”

In early April Japan’s central bank announced a massive program of monetary easing that would double the country’s money supply and target a 2% inflation rate—all in an effort to once and for all slay the deflation dragon that has plagued Japan for at least a decade.

Fed