According to the Federal Reserve’s Flow of Funds Accounts published last Friday, the market value of the equity issued by US non-financial companies at the end of H1 2011 was almost identical to the net worth (assets minus liabilities) of such companies at replacement cost. As the geometric average since 1900 of this ratio – known as Tobin’s Equity Q – is around 0.65, one might conclude the market was overvalued by more than 50%. However, a huge increase in corporate expenditure on intangible assets that are not captured in net worth means the actual degree of overvaluation is probably a lot less.