No, we are not in a tech bubble.

Simple as that.

This is not to say there aren’t some things for investors to take heed of. But as the definition of bubble goes, all the telltale signs are missing.

As investors, our job is to predict the future. Seriously. Each time we make a bet on a particular investment, we’re essentially postulating a thesis about how the future will unfold in that specific instance.

Since we also intensively study our markets, we often cannot help ourselves when it comes to predicting big macroeconomic events. Like bubbles. Just search Google News for the word “bubble” and you’ll find—mixed with the occasional article on the Dodgers’ odd homerun celebration tradition—dozens of articles on market bubbles with one bias or another.

And, thanks to the bull run we’ve seen in the overall stock market and in technology stocks in particular over the past five years, the vast majority of the commentary recounts just how well stocks have performed, followed by a pronouncement that it cannot last.

Most of us were stung by the market run-up from 2002 to 2007, which ended in a downright brutal slap to the face with the credit crisis. So it’s easy to understand why people are worried about any good thing lasting too long. That’s called recency bias—seeing a pattern of what happened last in what’s happening now, regardless of the reality. It’s a natural evolutionary byproduct to fear more of the same danger.

Instead, any good analysis has to start not with a feeling, nor with looking backward at a situation that may not be comparable, but at the here and now. Is this market fairly valued, frothy, or downright bubblicious?

The Public Markets Are Frothy… Sort Of

Defining what exactly it means to be in a bubble is a difficult job, even if you apply advanced metrics. Just how far and how fast does an index have to rise to constitute a bubble? Hard to say. Hundreds of pages of academic journals have been dedicated to the subject, with little or no consensus.

Yet we know a bubble when we see one, at least in retrospect.

Like this one:

The New York Times’ Bill Marsh and Yale’s Robert Shiller showed just how out of whack the housing market got in one simple graph. Pretty easy to spot the bubble there, isn't it? And to see just how far things had to fall to get back to “normal.”

Yet who was drawing this graph in ‘06? Anyone could have. (Okay, shameless plug: Casey Research did.) But back then, according to the mainstream financial media, housing prices were going to rise forever; every American could become a proud homeowner. Had they simply looked at the data though, it could have been clear that that wasn’t true.

The point is: without the benefit of some shared agreement on what is normal, knowing when you’re in a bubble is damn near impossible. You have to have some agreed-upon measure of normal to know if you’re abnormal, after all. Thankfully, investment markets agree on lots of such things.

So, just how does the current valuation of the Nasdaq Composite Index, a widely used barometer for technology stock performance, compare to its previous bubble? Many observers decry the fact that the Nasdaq is edging very close to its bubble peak price once again:

Seems really similar, doesn't it? However, if we look at a different measure—the price/earnings ratio of the Index—we get a very different picture.

While our orange line (the price of the Index) is just about at the bubble’s peak height, the P/E ratio delineated by the blue line is not. The difference between then and now should be obvious—the price paid for profits is many-fold lower now than at the bubble’s peak

The price of the biggest tech stocks in the world have moved up in tandem with increased earnings, one universal measure most investors agree on. In other words, the rise is justified. It’s not some George Gilder-fueled pipe dream of lasers shooting between buildings (tip: they don’t work in the rain) or a pitch book that has every UPS truck carting around thousands of pounds of pet food.

However, we want to err just a bit on the side of caution here. Let’s look a little closer at the tail end of that graph. It does paint a crisper picture of where we are today.

As you can clearly see, even though it is nowhere near the highs of the dot-com bubble, the P/E of the tech market has been steadily rising for three years straight. It’s now far above the long-term average of 17, which it crossed in 2011 on the way back up from the lows of the crash, halfway through this recovery period. This means that a large part of the rise in the Nasdaq is speculation that earnings will increase, but that have so far failed to materialize.

Over 80% of the gains posted in the last year are from this expansion of the P/E multiple. That’s a problem going forward. The trend is simply not sustainable; it must eventually shake out and reverse.

The Nasdaq is more highly valued than it has been in the last few years and is probably in need of a correction. But we’re still not talking the kind of reset required in 2000 in tech stocks, or 2007 in housing. This is not a bubble—but the market is notably frothy. If earnings don’t start catching up to valuations soon, we could be headed for a bit of trouble.

This is the first in a series of articles on the tech bubble topic. Stay tuned to for the follow-ups.