Today, we are joined by Andrew Smithers, Author, Economist and Founder of Smithers & Co, to discuss how we can achieve economic stability, based on his book, “The Economics of the Stock Market”. We address the Q Ratio and why it is important for economic stability, how to use the idea of hindsight value to predict markets and how monetary policy has contributed to economic instability, the incentives for a company’s management and how to balance the level of leverage. Lastly, we discuss reasons why policy makers should be focusing on Q, what Andrew has planned for the future and much more.
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00:00 - Intro
02:15 - Introduction to Andrew
03:28 - Key messages from his book
06:42 - How is the Q Ratio constructed?
14:34 - The idea of hindsight value
23:31 - How Quantitative Easing caused instability?
26:49 - How remuneration policies have led to an increased Q value
31:14 - The incentives for management
42:30 - Should policy makers focus more on Q?
53:10 - The economic consequences of Alan Greenspan
56:21 - Andrew’s plans going forward
01:04:42 - Key takeaways from Niels