There are few things less important for the future of America right now than the stock market. But the disconnect between rising stocks and everything else is still interesting. So a few notes 1/

One key point for making (some) sense of stocks is the question, where else are you going to put your money? Interest rates, especially on inflation-protected bonds, have plunged 2/

This interest plunge, incidentally, basically reflects long-term economic pessimism. So in a perverse way strong stocks may in part result from *bad* economic prospects 3/

Now, traditionally we would expect the effect of low alternative yields on stock valuations to be dampened. Why? Tobin's q, which has nothing to do either with conspiracy theories or with this guy 4/

Instead, the argument is that higher valuations relative to the replacement cost of capital will induce investment, which drives returns down over time. And markets will supposedly take those future effects into account, limiting the initial rise 5/

But this assumes that profits are a return to physical capital — which in some industries they are. But what if they're largely rents reflecting some kind of monopoly position? Then lower interest rates won't lead to investment that reduces these rents. 6/

And of course that's a good description of the tech giants whose stocks have soared most. So a good guess is that at least part of what's going on is that long-term pessimism has reduced interest rates, and this has *increased* the value of stocks issued by monopolists 7/