Nobel winner's math is showing S&P 500 unhinged from reality
James Tobin's Q ratio indicates equities in US are valued about 10% above cost of replacing their underlying assets
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IF you sold every share of every company in the United States and used the money to buy up all the factories, machines and inventory, you'd have some cash left over. That, in a nutshell, is the math behind a bear case on equities that says prices have outrun reality.
The concept is embodied in a measure known as the Q ratio developed by James Tobin, a Nobel Prize-winning economist at Yale University who died in 2002.
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