Good stuff Rock On, I've heard of John Mauldin before but haven't read any of his writings.
Of course the trick is to figure out what the S&P earnings actually are and/or going to be. John is saying the S&P 500 PE is 23 which corresponds to a real return of 3.2% historical. On the other hand the WSJ and the Standard Poor has the current P/E of 16.5 which gives a real return of ~6% by historical measure.
On the other John isn't just making the P/E ratio of 23 up. Because S&P estimate for Q2/2008 has the PE ratio of 23.
So once again is the market fairly valued or overvalued? well that depends on future earnings....