I downloaded his Excel sheet (which has more recent numbers than Wikipedia). I'm not sure what he means by "real price" and "real earnings" (as opposed to "reported earnings"?). But if I add a column for "real P/E", it puts us at just under 20, which is on the historical high end. So, following the trend in his data, I would expect the P/E to gradually decline to 15 or so, maybe even down to 10. (Under 10, buy like mad.) However, his data show gradual rises and then declines over a period of 20 - 40 years or so. These are punctuated with sharp drops, but according to these data, I would expect the next correction to drop us down to maybe 18 at most.
From some cursory chart exploration on yahoo, it looks like large-caps might not follow the market moves as much. Mar 2009 was about 50% of the S&P 500's current level, but KO only differed by 30% and JNJ only varied by 10%. I'd say solid dividend companies are not necessarily overpriced.
Real vs reported means that the real numbers have been adjusted for inflation from some base year (and looking at the CPI from his data, the base year is mid 1983). The problem with looking at such a huge data set (this goes back to the late 19th century, is that the companies, industries and the world that we live in shifts significantly over time. So the 'real' numbers are extremely important, but I'd have to do some more research to find out how his CPI calculations change from one era to another. This is important because (to the best of my knowledge) there is nothing that says that the P/E ratio of a major industrial company in the 30s (thinking like Rockefeller, etc.) is equivalent to that of a big tech company now. So as industries change, investment attitudes, etc. change, which will affect the overall P/E.
And as far as the market being expensive in relation to historics, again you have to compare apples with apples. There are more people investing now than 50 years ago, and there are more big companies. Both of these facts will drive up the price of the mainstream companies' shares.
From some cursory chart exploration on yahoo, it looks like large-caps might not follow the market moves as much. Mar 2009 was about 50% of the S&P 500's current level, but KO only differed by 30% and JNJ only varied by 10%. I'd say solid dividend companies are not necessarily overpriced.