If you value an asset according to a ROR above its long-run average, doesn't that mean it is over-valued?
mbs (chief asset: '96 Lumina) This is not as silly as it sounds. The fact is that in 1929, the profit rate had attained its cyclical peak (before a very steep cyclical decline). High earnings allow high stock market valuation. The problem was that the profit rate -- and thus the stock market -- rested on a house of cards. The US and world economies were extremely unstable. There probably was a stock market bubble going on, too. But even if there wasn't, the stock market was going to fall as earnings plummeted in the recession. Jim Devine
