The following are the median price earnings ratios of the Russell indices.  The first ratio is the PE relative to 2008 earnings, the second is the PE relative to forecasted earnings for 2009.

Russell 1000 - 8.1x, 9.6x
Russell 2000 - 7.0x, 8.4x
Russell 3000 - 7.5x, 9.0x

The Russell 3000 is an index of the largest 3000 stocks in the United States.  The Russell 1000 is an index of the largest 1000 stocks.  The Russell 2000 is an index of the next 2000 largest stocks.  The Russell 1000 and Russell 2000 indices make up the Russell 3000.  Generally, the Russell 1000 is an index of large-capitalization stocks while the Russell 2000 is an index of small-cap stocks.

People making the argument that stocks are expensive are misleading you.  The reason why earnings have collapsed is because of write-offs in the financial sector.  Most stocks are not financial stocks, and relatively few companies in the universe of ~3000 stocks in the Russell indices have taken or will take large write-offs.  Thus, a true gauge of the market's valuation is the valuation of the average stock.

And the average stock is cheap.  Very cheap.