{"id":5726,"date":"2015-02-14T09:09:51","date_gmt":"2015-02-14T14:09:51","guid":{"rendered":"http:\/\/olduvai.ca\/?p=5726"},"modified":"2015-02-14T09:09:51","modified_gmt":"2015-02-14T14:09:51","slug":"the-myth-of-black-swan-market-events","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=5726","title":{"rendered":"The Myth of Black Swan Market Events"},"content":{"rendered":"

The Myth of Black Swan Market Events<\/a><\/h3>\n

Mark Spitznagel \u00a0is the founder and chief investment officer of Universa Investments, and the author of \u201cThe Dao of Capital.\u201d<\/em><\/p>\n

As Andr\u00e9 Gide, the French Nobel laureate in literature, once said, \u201cEverything that needs to be said has already been said. But since no one was listening, everything must be said again.\u201d<\/p>\n

Indeed, no one has been listening to the past hundred years of stock market history in the United States.<\/p>\n

We have data going back a century that shows the total aggregate valuation of corporate America (think the stock market) in relation to the estimated aggregate replacement value of its stock of capital (think machines, equipment, buildings, chairs, etc.). It is similar in concept to an aggregate price-to-book ratio.<\/p>\n

This has come to be known as the Tobin\u2019s Q ratio; the higher the ratio, the higher the price of corporate valuations relative to their tangible capital, and the more \u201cexpensive\u201d the stock market.<\/p>\n

\n
Photo<\/span><\/p>\n
\"The<\/div>
The Q-ratio (relative to its long-run average)<\/span>Credit<\/span>\u00a0Mark Spitznagel<\/span><\/figcaption><\/figure>\n<\/div>\n

You would think that this ratio shouldn\u2019t get far out of whack from a long-run average. If average companies became valued high relative to their tangible capital, this would imply that they earn high returns on their existing equipment, and thus further investment in more equipment (growth) should more than \u201cpay for itself\u201d in the form of higher valuations.<\/p>\n

 <\/p>\n

…click on the above link to read the rest of the article…<\/p>\n","protected":false},"excerpt":{"rendered":"

The Myth of Black Swan Market Events Mark Spitznagel \u00a0is the founder and chief investment officer of Universa Investments, and the author of \u201cThe Dao of Capital.\u201d As Andr\u00e9 Gide, the French Nobel laureate in literature, once said, \u201cEverything that needs to be said has already been said. But since no one was listening, everything […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1552,500,3565,506,3566],"class_list":["post-5726","post","type-post","status-publish","format-standard","hentry","category-economics","tag-black-swan-event","tag-market-collapse","tag-market-corrections","tag-markets","tag-q-ratio"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5726","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5726"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5726\/revisions"}],"predecessor-version":[{"id":5727,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5726\/revisions\/5727"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5726"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5726"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5726"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}