The thing that struck me in looking at the graph of Q (the ratio of the market value of capital, as measured by stock prices, to the replacement cost of capital, as measured by the cost of replacing capital) over the years in Felix Salmon’s column is that between the time when the trend in Q went from falling to rising was a period of 17 years and during that period the stock market, basically, didn’t go up at all. All of the enormous increases in the DJIA have taken place in the twenty some-odd years since then.
And look at the value of Q now! The trend has been downwards for eight years. Either we going to see an enormous change in the volatility of the markets and the economy or the markets and investors may be in for a long, slow wait.
