WALL STREET REVALUATED IMPERFECT MARKETS AND INEPT CENTRAL BANKERS SMITHERS A. Księgarnia

Andrew Smithers, one of the world’s foremost economists, showed that at its peak in 2000 the US stock market was wildly over-priced and argued that central bankers should adjust their policies to prevent asset bubbles. But the Federal Reserve claimed that assets could not be valued and that they should ignore asset prices.

In Wall Street Revalued, Andrew Smithers argues that the Federal Reserve was wrong on both counts and that these errors were the major cause of the current recession and financial crisis. He shows how investors and central banks can value assets, so that incipient bubbles can be identified and a repetition of today’s problems avoided.

Indifference to overvalued asset prices by investors, central banks and much of the financial press is the root cause of the current crisis. Bubbles in stock markets, house prices and financial assets cause huge damage when they fall, not only to their owners, but also to the world economy. An understanding of how to value assets is therefore vital for managing the economy as well as for investors.

Wall Street Revalued explains how assets can be valued and shows how much incorrect and inaccurate information is published on the subject and how to spot this. Among investment bankers and financial journalists the two most common claims to value are, as Andrew shows, unadulterated nonsense. One of these is that "Shares are cheap given the level of current (or forecast) PE multiples" and the other is that "Shares are cheap relative to interest rates".

Andrew also explains how asset prices affect the economy and how central banks lose their ability to stabilise it when bubbles collapse. The denial that markets can be valued has caused great damage. Markets are not perfectly efficient, nor are they are irrational casinos. This book sets out a new model for understanding the limited efficiency of financial markets, which is the key condition for improving investment and economic management today.

Table of Contents:

Foreword.

Chapter 1 Introduction.

Chapter 2 Synopsis.

Chapter 3 Interest Rate Levels and the Stock Market.

Chapter 4 Interest Rate Changes and Share Price Changes.

Chapter 5 Household Savings and the Stock Market.

Chapter 6 A Moderately rather than a Perfectly Efficient Market.

Chapter 7 The Efficient Market Hypothesis.

Chapter 8 Testing the Imperfectly Efficient Market Hypothesis.

Chapter 9 Other Claims for Valuing Equities.

Chapter 10 Forecasting Returns without Using Value.

Chapter 11 Valuing Stock Markets by Hindsight Combined with Subsequent Returns.

Chapter 12 House Prices.

Chapter 13 The Price of Liquidity – The Return for Holding Illiquid Assets.

Chapter 14 The Return on Equities and the Return on Equity Portfolios.

Chapter 15 The General Undesirability of Leveraging Equity Portfolios.

Chapter 16 A Rare Exception to the Rule against Leverage.

Chapter 17 Profi ts are Overstated.

Chapter 18 Intangibles.

Chapter 19 Accounting Issues.

Chapter 20 The Impact on q.

Chapter 21 Problems with Valuing the Markets of Developing Economies.

Chapter 22 Central Banks’ Response to Asset Prices.

Chapter 23 The Response to Asset Prices from Investors, Fund Managers and Pension Consultants.

Chapter 24 International Imbalances.

Chapter 25 Summing Up.

Appendix 1 Sources and Obligations.

Appendix 2 Glossary of Terms.

Appendix 3 Interest Rates, Profi ts and Share Prices by James Mitchell.

Appendix 4 Examples of the Current (Trailing) and Next Year’s (Prospective) PEs Giving Misleading Guides to Value.

Appendix 5 Real Returns from Equity Markets Comparing 1899–1954 with 1954–2008.

Appendix 6 Errors in Infl ation Expectations and the Impact on Bond Returns by Stephen Wright and Andrew Smithers.

Appendix 7 An Algebraic Demonstration that Negative Serial Correlation can make the Leverage of an Equity Portfolio Unattractive.

Appendix 8 Correlations between International Stock Markets.

Bibliography.

Index.

256 pages, Hardcovera

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