CUPERTINO (CBS / AP) — This week is the second anniversary of the bull market that followed the financial meltdown. The Standard & Poor’s 500-stock index is in its fastest climb since 1955, doubling since the market bottomed on March 9, 2009.

As a result, some are worried about another bubble in stock prices.

Stock bubbles are famously hard to define. In 1999, for instance, investors thought it was perfectly rational to pay 62 times a company’s earnings per share for a technology stock because it seemed dot-com companies couldn’t lose. They only realized their error when many of those companies, many located in San Francisco and Silicon Valley, turned out to be nothing more than slick marketing ploys.

After two bubbles in the past 10 years — tech stocks and real estate, both of which hit the Bay Area hard — investors are suspicious of consistent gains that seem too good to be true.

Rob Arnott, the founder of investment firm Research Affliates, thinks the stock market is “dangerously” overpriced. He points to Cupertino-based Apple, which has a $321 billion market value, making it the second-largest company in the world behind Exxon Mobil. By revenue, profits or payouts to investors, however, Apple fails to crack the top 20, Arnott said.

“They have wonderful products and a finger on the pulse of the consumer like nobody else,” Arnott says. “But the second-largest on the planet must mean Apple is the second-largest source of profits. Boy, that’s a stretch.”

But other investors point to the economic recovery and believe the stock market may simply be back to normal as opposed to nearing a bubble.

“The economy is absolutely justifying what is happening in the stock market,” said Liz Ann Sonders, an investment strategist for San Francisco-based Charles Schwab.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report.)


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