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  1. Default TOBIN's Q ratio

    Anyone heard of this before? Just listened to a piece about it on Bloomberg; basically a Q reading of .3 is needed to signal a bottom in the S&P500. The current reading is .7 which indicates another 55% downward move in the index.

    The Q ratio is based on whether it's cheaper to buy the company or rebuild it from the ground up, very interesting.

  2. Default

    I read this guy as saying that the failure of the stimulative efforts will result in a flight from U.S. assets--including equities. Therefore, he sees the inflation first and then the (devastating) deflation. A slightly longer-term view, but is it more accurate?

  3. Default

    I thought the interesting part was that according to the Bloomberg piece, in each of the previous recessions the Q ratio had fallen below .3 before a recovery took place. However the view this time is that the number will not be reached until 2014, which makes it hard to believe that we will be in a slump for 5 or 6 years. I could see the potential for the S&P to drop to 400 but not over such a long period of time unless this turns into a depression.

    It only took a year for the indexes to drop 40%+ and with the volatility we've seen this year, a drop of that magnitude shouldn't take too long if it's going to take place at all.

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    Look at the years after 1933 though, can we hope for the same?

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    I don't think so; in the '30's this whole game was run by the upper class folks, this time around we have a lot of regular joes in the game and immediate access to global events. The age of technology works against us in some instances.

  6. Default

    According to Doug Short's presentation Tobin's Q is at levels often associated with past market tops.

    http://advisorperspectives.com/dshor...-Valuation.php

    For more info on Tobin's Q:

    http://en.wikipedia.org/wiki/Tobin%27s_q

    http://www.investopedia.com/terms/q/...#axzz2GtEpq17u

 

 

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