Spitznagel created his own index for tracking the market cycle he calls the Equity Q Ratio. Calculating the ratio starts with the relationship of the cost of titles to capital (stock prices) to the cost of the capital the title represents. That part is roughly comparable to a price-to-book value. Then Spitznagel compares the actual ratio to the historical average. The deviation from the historical average is the Q Ratio. The stock market in October was 71% above the long term average. It was higher only just before the dot.com crash of 2000.
