by Glenn Busch
June 20, 2011
Many investors today, professional and amateur, are children of the bull market. The 1980s and 1990s were a great long-term secular bull market. Every dip was to be bought and investors were treated to double-digit returns. Everyone expected the good times to last and the stock market was bid up to stratospheric levels. 10 years later we are still working off these extreme levels and returns will be muted because of this.
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by Glenn Busch
June 9, 2011
Economic Nobel laureate James Tobin wrote about the Q ratio back in the 1960s and now Andrew Smithers of Smithers & Co., Ltd., continues on the tradition with his research firm. In essence it is a simple way to measure whether the stock market is under or over-valued based on the replacement value of the entire stock market. Market valuation is determined from the relationship of the current value of Q to its measurement of fair value.
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S&P 500 Real Returns and Tobin’s Q
by Glenn Busch December 16, 2011The recent third quarter Flow of Funds report allowed us to update Tobin’s Q. The ratio created by James Tobin and championed by Stephen Wright and Andrew Smithers came in at 0.82. A Lower reading than the previous quarter but still above fair value. Using Professor Robert Shiller’s data I can overlay annualized total real returns for the S&P 500 with Tobin’s Q. The first chart is 10 year annualized total real returns for the S&P 500 and Tobin’s Q.