Rating: 
Summary: Buy and hold or buy and sell?
Review: Although there's plenty of evidence one cannot time the market short term--just look at managed portfolios compared to major stock indexes--that does not mean it's not possible over much longer cycles. The usual metric, P/E ratio, for measuring these cycles is occasionally wrong, like once or twice a century, e.g. if earnings are unusually small, as in the Depression. Better to use something similar to price-to-book value, "q". Averaging over all companies, and looking back over the last hundred years of market data, q tells you when stocks are overpriced more reliably than P/E. If you buy stocks at below average q and sell them when q is above average, you'll outperform a buy and hold strategy.Of course, people already ignoring P/E are unlikely to be swayed by a refinement. That's why the second aspect of this book is important. It's one of few books that tell you *not* to own stocks now. It presents historical data--someone unfortunate enough to enter the market just before the 1929 crash would have had to wait 25 years to catch up with an all bond portfolio--to show how bad an investment stocks can be. Holding bonds until P/E returns to single digits, where it was at the start of the bull market in 1982, will never appeal to some people, but that's this books' advice in a nutshell.
Rating: 
Summary: Great read lacks practical means of application.
Review: Being a value investor, I couldn't agree less with your observation that the market is still overvalue even after falling so far. Your observation that if the price of existing companies exceed the replacement cost of company or its net worth surrogate, then it make sense for new companies to enter the field and compete away the abnormal valuation. This is simply economic 101. The only thing I do not agree is that I found your bearish prediction a bit too much in terms of magnitude. Since Tobin Q is price over net worth. Not going into too much detail, I think net worth determines the asset you can employ to generate return. This is kind of related to the market return of assets ROA. But ROE, which I think is the ultimate determination of overall market valuation, is according to Du Point Analysis = ROA X Leverage. If in the past ten years, due to advancement in financial management, the overall leverage has increased (though still sustainable), then the over-valuation of the market will not be as much as you described. The market is definitely overvalue, but it may not be as high as you described. Anyway, your book is great for the average investors and also for most people who wishfully think that they are above average.
Rating: 
Summary: Good but hard to read
Review: It's hard to rate a book of this type. Some will look at with a jaundiced eye and give it a low rating, some will think carries great worth backed up with lots of research and give it a high rating.
I can sum up the gist of the book with one sentence. The stock market is often way overvalued and buying during those times will give poor return even if stocks are held for long periods. This information is valuable, but unfortunately, most of the type of people that get killed when the market corrects will not be the ones that read a book like this.
As for me, I'm not even an investor, just a student looking to gain knowledge about markets in general. I found a lot of this book to be hard to read and filled with too many statistics and mathematical formulas. It could have been written in a more basic conversational tone and still have all the charts and math in an appendix.
I can assure the reader that no stock broker is going to being singing the praises of this work, it simply states something they won't want to hear. There are times, and we may still be in such a time, that the stock market is simply overbought and money would be better off sitting on the side lines waiting for prices to be more realistic. I happen to agree with the basics they present here, they made a logical argument, and certainly the last bubble that burst proved that they weren't blowing smoke. As to the future, only time will tell, but with P/E ratios being so high, if I had to decide, I'd go with their analysis.
Rating: 
Summary: Scary Stuff
Review: Smithers and Wright have undertaken an exhaustive 100 year study of U.S. equity prices using Tobin's Q as their primary metric. Tobin's Q is defined as Value of Stock Market/Corporate Net Worth. Their analysis shows that as of the end of 1998, the U.S. stock market was overvalued by about 2 ½ times - the greatest margin in history. This is scary stuff, particularly for the legions of individual investors in the United States that have rushed into the stock market in recent years, and have a naive faith that they should get a God given 20% return per annum compounded. Although the NASDAQ is now down 50% from it's March 2000 highs, it is still above that December 1998 value discussed by Smithers and Wright, as is the DOW. Thus, their warnings are as pertinent as ever. Smithers and Wright do a good job of taking the reader through various historic tests of Tobin's Q, comparing it to other measures of stock market valuation, such as PE ratios and the dividend yield. They show that Tobin's Q is a better measure of valuation. Their writing is straightforward and accessible to the general reader. Their message is compelling and extremely valuable. Their main conclusion, which psychologically will be very hard for most readers to accept, is that the best thing that most investors can do right now is to get out of the stock market altogether and wait until valuations return to more reasonable levels (their analysis suggests that a 50% decline in the DOW is quit possible). Smithers and Wright show that a "go to cash" strategy would have worked in the past and they do a good job of explaining why it will not be any different this time around. The book is must read for any individual investor. My only criticism is that they take too long to make their points. A book of half the length would have been appropriate.
Rating:
Summary: Lack of Practical Application
Review: The book painstakingly sets out the case for the q ratio, which appears to have merits as a method of valuing markets. There is no doubt that the markets remain overvalued, and are due for further correction, however the q ratio, along with other blunt tools, do not offer effective market timing abilities. The authors try to make a case for market timing, using a long term time horison however if the time horison is shortened the supposed "buy" and "sell" signals would not be decipherable as with Charting there would be confusing signals. The book therefore lacks practical application as a trading tool, however does offer an alternative for market valuation. By the way the problem of bear market risk can be overcome by adopting a buy-and-hold strategy, which is rebalanced annually using a value-averaging technique (see Edleson - Value Averaging).
Rating:
Summary: The Latest Value of Q Now Available
Review: The latest computed value of Q can always be found at http://www.smithers.co.uk/keydata.shtml . For example I visited that web page on 1-18-2004 and found: "As of 20th June, when the S&P 500 was at 995.73, the market was selling at 1.46 times its long-term average, according to q, and thus needs to fall by 31% to reach fair value." It is strongly advised that investors check this web page at least once a month for possible updates. A word to the wise is sufficient! (Also if you purchase the book, do not forget to look at the Virtual Appendix at http://www.valuingwallstreet.com/VApp.pdf )
Rating:
Summary: interesting but incomplete
Review: The material was simple enough to digest, and certainly believable. It also provided good insights on the real behavior of investors, i.e. most investors are not long-term investors and the perils of retiring during a down period. The book also provides a good benchmark for when to invest, although the fact that I rode the market up on its fallacious valuation has not harmed me, since I transferred my portfolio to bonds before the market started heading down.
Rating:
Summary: Absolutely on target
Review: This book and Shiller's book aren't really competitors but complements. I'd say this book is better on valuation, and Shiller's book is better on the softer side (i.e., hypothesizing about the potential causes of today's frenzy). Furthermore, I think this book's faith in Q vs. other indicators, while well researched, is a bit overdone. Each indicator, including Q, has it's problems, and a rational person probably gives some weight to each (though this current book probably has me giving Q the nod). Conveniently, today's market doesn't make one choose, they all make the market look ridiculously expensive. Any bear in their right mind would be comforted by this agreement. One day, when the market is much lower, perhaps we'll have to consider harder which indicator to believe (i.e., when/if they disagree). But for now, read this book, read Shiller's book, and get very very cynical about the level of today's stock prices.
Rating:
Summary: Entertaining, Readable, and Thought Provoking
Review: This is far from the dry boring stuff that is usually written on finance. The authors produce an extremely convincing and logical argument that the stock market is overvalued. This is based on comparing Tobin's q to its long term average. Tobin's q is based on flow of funds data and hence overcomes the problem of looking at corporate data. They also discuss other valuation techniques and explain their strengths and weaknesses. The book is full of interesting insights. I particularly like an example they use to demonstrate the power of compund interest. A gem of a book and well worth reading what ever your view on the state of world equity market.
Rating:
Summary: Overly simplistic
Review: While the enormous flutuation of Q away from its mean certainly suggests that investors should exhibit caution with respect to the allocation of their funds, this book offers very little to bring clarity or insight to Tobin's concept of the Q ratio. Even Tobin himself would not subscribe to the current excursion of Q as evidence that some crash or bubble bursting is emminent. When recently asked about the possibility of a crash and market overvaluation his response was "I am agnostic. Many people do conclude from the record high value of Q that the market value of equity is bound to fall. They may be right, though they haven't been yet. There are other logical possibilities. Maybe there has been a fundamental reduction in the cost of equity capital, the risk premium on stocks relative to bonds and federal funds. Then the high value of Q is a signal and incentive for real productive business capital investment; gradually the increase in stock of corporate capital at replacement cost will reduce the marginal productivity of capital and reduce Q , but no bubble and no crash. Another problem is that increasingly the capital value of companies is not tangible assets but human capital, more precisely the ability of the management to find and hold the brightest innovators. It's like betting on the coach of a sports team. That kind of asset is not in the denominator of Q as we calculate it. " This book spends precious little time examining the Q ratio looking at its flaws and how it might be improved to provide better insight or clues. Furthermore, the book does little to make clear that while the variable may in fact show "regression to the mean" as stated over and over, the time period for the return to the mean is ignored. That we are in the midst of a very large excursion from the mean is obvious. One needs to address what factors will drive us back to the mean over what time frame or perhaps the method of measure is incorrect. The authors wrote as if they were afraid of any math more complicated than simple fractions and that the public could not digest anything more than the simplest of graphs. This book is clearly more overvalued than the marketplace itself.
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