Reading the runes

I spend much of my time scrutinising the post-modern equivalent of tea leaves - value-based fundamental measures of the aggregate market alongside technical and liquidity-driven metrics.

These yardsticks include mainstream terms such as Shiller P/E, Tobin’s Q ratio and the Vix through to slightly more esoteric measures such as the put call ratio on the FTSE 100 and my personal favourite, the S&P 500 capitalisation as a % of US GDP. It is 79% and rising, worryingly. In periods of heightened volatility or key turning points these metrics are invaluable, but in the current market they are next to useless. Nearly every fundamental measure is currently flashing a pale shade of amber, with terms like fair value and neutral abounding. Tobin’s Q ratio for instance was recently s...