So much for the double-dip recession and a new bear market. With upside surprises Wednesday in the Institute for Supply Management's manufacturing survey and Friday morning's August jobs report, it's safe to say the correction in stocks is over.

I knew this was going to be a good week in the markets when I looked in my inbox Monday morning. There was one particular email from a regular reader of this column, who was politely but firmly skeptical of my rather bullish take last Friday, which was based on the fact that consensus forward corporate earnings continue to move higher.

This reader pointed me to an article in Monday s Wall Street Journal, which stated that growth estimates are moving lower. He suggested those estimates undermined my bullishness. In fact, that is no contradiction at all. Growth estimates and earnings estimates are very different. Growth is the difference between past earnings and future earnings. Future earnings are expected to rise, as I said. However, past earnings are rising too. So the difference (growth) is narrowing. I explained this phenomenonin in a column a month ago, when I talked about how the huge operating leverage at companies, which was temporarily impaired by the recession, would lead to big earnings growth even in a slow economy.

But none of that wonkish stuff was the real point of the Journal article, and it's not what's gotten me so inspired. The article was called "The Decline of the P/E Ratio," a double entendre based on the fact that P/E ratios have fallen to very low levels in this year's stock market correction and the author's contention that P/E ratios have declined in importance as an indicator of value.

Does this all sound somewhat familiar? Somewhat laughably familiar? How many articles like this came out in 1999 and 2000 at the peak of the dot-com bubble, when P/E ratios had risen to stratospheric heights that, by all previous experience, indicated that stocks were massively overpriced? The articles then said the same thing as this one did on Monday -- that it's a new world in which P/E ratios don t matter any more.

Back then, many of the hottest companies didn't have any earnings at all, so their P/E ratios were "infinity." But no matter. Get your position in that pet-food delivery web site, no matter what! As we all know, the old-fashioned wisdom about P/E ratios turned out to be absolutely correct. They were too high. The NASDAQ crashed from 5,000 to 1,000 over two years. The companies that survived had more realistic P/E ratios at the end of that horrific experience.

So how perfect. How symmetrical. In 1999, we had to ignore P/E ratios because they were too high. Now in 2010 we have to ignore them again, but because they are too low. That was the upshot of the Journal article.

This is the way markets work. Tops happen when people become irrationally exuberant -- they ignore the warning signs telling them there is trouble ahead. Bottoms happen when people become irrationally despondent -- again, they ignore the signs telling them the trouble is over.

I hear some of that folly in conversations with my institutional investor clients. Most of them are absolutely convinced that the economy is already in a double-dip recession, and it's just a short matter of time before there's another big leg down -- in GDP, employment, home prices, retail sales and the stock market.

But when I ask them to explain exactly how that's going to happen -- considering that all these things have already fallen so far already -- they don't really have an answer. They end up scaling back what they mean by a double dip. Instead of an outright decline in GDP and employment, they say there will be just very slow growth.

But even then, they say, stocks have to go down. But why should stocks go down when all the big investors are so sure they will? After all, they've already sold because they expect stocks to go down.

Who's left to sell?

Not ordinary individual investors. Part of the same bearish narrative is that they've all been scared out of the stock market by the high volatility supposedly induced by computerized "high frequency trading." That's another story for another day. But if individual traders aren't in stocks in the first place, then they aren't there to sell and drive stocks down.

I just don t see the bear case. I see the sluggish economic data, to be sure. But generally, it's all positive -- just not as strong as we'd like, or as we'd normally expect coming out of a deep recession. And as I mentioned earlier, even when economic growth is slow, corporate earnings -- which drive stock prices -- can still rise quite rapidly because of companies' operating leverage. Why else do you think corporate earnings have rebounded 35% from the lows last year while the economy has only rebounded 3%?

In a world like this -- with slow but positive growth -- why shouldn't low P/E ratios indicate value in stocks? The reality is that when you own a piece of a company through its publicly traded stocks, you have a proportionate claim on its earnings. If you can buy a dollar of next year's earnings for about $11.50 -- which you can do right now -- that's really quite a bargain compared to your other opportunities.

That's giving you an effective yield -- in earnings -- of about 8.7%. That sure beats the big zero you get now in money market funds. It beats the roughly 2.5% you can get in long-term Treasury bonds.

Back in October 2007, the last top in the stock market, you would have had to pay $15.20 for a dollar of future earnings. That's an effective earnings yield of just 6.8%. And long-term Treasurys would have yielded about 4.6%. So you weren't getting that much a premium for taking the risk of stocks. But now you are.

And back then, the economy was riding high, so it had a long way to fall. Now it's already fallen. Can it fall again? Maybe, but I don't think so. And I know that it's harder to fall a great distance from a small height than it is to fall a great distance from a great height.

When a fire alarm rings, don't ignore it. Move. Today's low P/E ratios are like a fire alarm, but they're signaling you should get in, not out. Don't ignore the signal.