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To: Follies who wrote (33031)	11/1/2000 5:50:52 PM
From: pater tenebrarum	Respond to of 436258

Tobin's Q is financial asset capitalization divided by the replacement value of corporate balance sheet assets. it's very similar to price vs. book value,though not exactly the same. in some cases the ratio of total market capitalization (stocks and bonds) vs. GDP is also referred to as Tobin's Q, but the above definition is what it really is. the interesting thing about Tobin's Q is that as a market valuation measurement tool it is very accurate in giving one an idea of the 'value' element of the market, since it compensates for inflation (by using the REPLACEMENT value of corporate assets as its denominator). however, it has fallen out of favor in recent years as the market mania has produced the by far highest Tobin's Q ratio in history. this implies both that the information it conveys is long term unbullish, which is contrary to WS propaganda, and that it has somehow lost its usefulness for market analysis because it has surpassed previous secular bull market peaks by such an incredibly wide margin. my own conclusion is that it is VERY bearish for the market's longer term outlook, and that long term investors will probably fare best by waiting for it to reach an undervaluation extreme before committing funds to the market.