A rally that began last year has already run up the prices of some stocks, creating small bubbles across the market. Some investors might be pushing prices higher ahead of their time for 62 of the stocks in the S&P 500 index. These companies now have P/E ratios of above 70, up from 23 a year ago. Says Robert Maltbie of Singular Research, "We have to temper some of this crazy bullishness." He tells USA Today that when P/E ratios approach 70, a stock can begin to have problems.

So, why are some prices being run up? As usual, any hope of rational price drivers is the domain of dreamers. Investors have found their favorites and sometimes haven't allowed reality to become a constraint on their excitement. Take a look at five reasons below:

This market is either a bargain hunter's paradise or a trap for the gullible.

As Bloomberg News notes, shares of software companies in the S&P 500 are trading 20.8 times their estimated profit, their lowest level since at least 1995 and industrial companies trade at 18.4 times earnings, lower than their average of 23.4 this decade. The S&P 500's price-to-earnings ratio of 16.8 for August was the lowest since November 1995, according to Bloomberg.

Echoing the sentiment of many bulls, AIM Investments' Fritz Meyer told Bloomberg that, "The market's probably seen the worst of it" and that the Fed will "ultimately ride to the rescue."

Really?

The housing market isn't improving any time soon. Retail sales are lackluster and consumer confidence remains shaky. And I'm not so sure that the Fed is too eager to ride to anyone's rescue. Chairman Ben Bernanke, as I've argued before, doesn't seem like he's eager to cut rates though the pundits say something will get done even if the Fed has to hold its nose.

Expectations are high which means that the potential for disappointment is huge. Today's bargains may stay cheap for quite some time. That doesn't mean people should avoid the market entirely. They just need to keep their expectations realistic.

Google closed down yesterday finishing at $367.23 per share on a day when the rest of the market moved notably upward. Although I have been very vocal about the stock price being overvalued in my Blogging Stocks posts, (see: 10 Reasons I think Google is going down), Google remains a very good company with a growing brand providing valuable services. So this begs the question: What is GOOG stock worth?

I'm not in the prediction business, I am in the investment business. Is there a price I would pay? Certainly. That price is unquestionably less than most other investors would pay because I always look for deep value. But is there a "fair market value?"

That's a very difficult question because the price is determined by what the last trader feels the stock is worth -- not everyone, not a consensus. For example, if you own a stock that you bought at $20 and it's now trading at $40, and you are holding on long term, then you are not a factor during the day when traders are moving the price up or down a few bucks. Your opinion on the value that day is silent and has no bearing on the price.

In trying to assess what the potential appreciation of the stock might be next year I had to make an assumption about the P/E ratio. This is based on what I envision is the level most traders will be willing to pay. If you use a P/E ratio of 40 and look twelve months out and assume Google's earnings continue to grow on a slower but still strong trajectory, you are looking at a lot of potential upside from here. GOOG's trailing twelve month EPS is $6.82. If it hits EPS of $12 then you might arrive at a value of $480. These are figures commonly discussed in the business pages and by analysts. Some of the thoughtful comments I have received to my posts suggest the same thing. Of course we have read higher estimates by Piper Jaffrey analysts who reached a $600 valuation. But to get there you must allow for EPS of $15 or a P/E of 50. That I am not willing to do, are you?