If you sold every share of every company in the U.S. and usedthe money to buy up all the factories, machines, and inventory,you'd have some cash left over. That, in a nutshell, is the mathbehind a bear case on equities that says prices have outrunreality.

The concept is embodied in a measure known as the Q ratiodeveloped by James Tobin, a Nobel Prize-winning economist at YaleUniversity who died in 2002. According to Tobin's Q, equities inthe U.S. are valued about 10 percent above the cost of replacingtheir underlying assets—higher than any time other than theInternet bubble and the 1929 peak.

Valuation tools are being dusted off around Wall Street asinvestors assess the staying power of the bull market that is nowthe second longest in 60 years. To Andrew Smithers, the 77-year-oldformer head of SG Warburg's investment arm, the Q ratio is anindicator whose time has come because it illuminates distortionscaused by quantitative easing.

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