After making a cogent new argument in defense of the still-controversial q ratio, the authors show how it plays into principles of stock-market risk and return, how it has determined the value of Wall Street in the past and will continue to do so, and how to apply it as a practical investing tool. They do a neat job of parsing the good and bad news about stocks as a sound investment for the future, and of what to do and not do with one's money come the inevitable bear market. From there, they get down to the nitty-gritty of valuing the stock market, providing four key tests for any indicator of value and explaining how to fold in such factors as the dividend yield, the price-earnings ratio, the adjusted price-earnings multiple, yield ratios, and yield differences. They wrap up with a look at what they call "the q debate" among both economists and stockbrokers, and finally, they apply the q ratio specifically to the U.S. economy, rebuking Alan Greenspan's Federal Reserve for its role in what they see as the coming U.S. bubble burst.

With its plain English, helpful illustrated charts, vivid examples from history, and even the occasional employment of the likes of Alice in Wonderland to prove its points, Valuing Wall Street should be accessible to those with a working understanding of the market and economic principles. All told, this book is not so much a how-to as it is a theoretical forecast whose tidings investors might want heed as we near what Smithers and Wright warn are rough years ahead. --Timothy Murphy