Valuing Wall Street:
Protecting Wealth in Turbulent Markets

by Andrew Smithers, Stephen Wright

When Valuing Wall Street was published in March 2000, the following statement was set out on the cover of the book.

The U.S. stock market is massively overvalued. As a result, the Dow could easily plummet to 4,000 – or lower – losing more than 50% of its value wiping out nest eggs for millions of investors. So argue Andrew Smithers and Stephen Wright in Valuing Wall Street: Protecting Wealth in Turbulent Markets. Using the q ratio developed by Nobel Laureate James Tobin of Yale University, Smithers & Wright present a convincing argument that shows the Dow plummeting from recent peaks to lows not seen in a decade. Using q, Smithers & Wright show convincingly and conclusively why today’s stocks are dangerously overvalued, and what you can do to protect your assets from the dramatic downturn that is a virtual certainty.

Subsequent events have dramatically confirmed the strength and validity of the arguments. Valuing Wall Street enables investors to understand how stock markets can be valued and how to benefit from this knowledge.

Andrew Smithers and Stephen Wright make a powerful economic argument that the New York stock market is “wildly overpriced” with shares at “ridiculous levels,” calculated by them using Noble Laureate James Tobin’s q, or ratio of share prices to net worth of companies, at 2 ½ times. They anticipate and explain why stockbrokers and mutual fund managers will disagree with their analysis and finding.

Professor Charles P. Kindleberger
Professor Emeritus, Massachusetts Institute of Technology.

Smithers’ approach is ruthlessly rigorous in destroying bull arguments based more on hope and business interest than hard analysis. In their place he provides a guiding principle, based on theory, common sense and history, that should help all investors – professional or amateur – achieve better long run returns at much lower risk. Smithers is currently a serious bear; to pay attention to his case now could be the reader’s most important financial decision.

Jeremy Grantham
Grantham, Mayo, Van Otterloo & Co.

Wonderfully readable, this book’s clear, direct logic borrows on Jim Tobin’s concept of “q” to explain why the marvellous past is not only not prologue to perpetually higher and higher market valuations, but is the probable cause of future returns being so small at best, and at worst, perhaps suddenly reversed.

Charles D Ellis
Greenwich Associates

The Smithers-Wright book is an important contribution to the debate on how to value stock markets.

Dr Sushil Wadhwani
Bank of England Monetary Policy Committee.

Valuing Wall Street is highly informative and should be especially helpful to those who wish to improve their investment performance. It is a very timely book and worthy reading in the current euphoric market.

Henry Kaufman
Kaufman & Co.

Andrew Smithers is one of the five best, most dispassionate, erudite analysts in the world. This is a book to read and chew on.

Barton Biggs
Morgan Stanley Dean Witter Investment Management.