He preferred to make long “takes” of complete movements or sections, going right back to the beginning if something displeased him. We now have a legacy of over 130 CDs by him in the current lists to testify to the power of his intellect and command of artistry.When he returned to London in 1989 after a 12-year absence, it was noted that he played from music in front of him illuminated by a single lamp he operated himself. He liked to record at night, from about nine o’clock until he was tired, usually around three in the morning, so as to have no distraction from meal breaks. Preferring the ambience of smaller festivals like this, he began the previous year an association with the Fetes Musicales at Grange de Meslay, near Tours in France.A fastidious, not to say pernickety performer, he was acutely sensitive to the horizontal plane of the keyboard, sometimes requiring it to be checked with a spirit level, especially in a recording studio. The chart shows the striking similarity between the three periods. Both of the earlier episodes ended in disaster for investors, particularly the 1927-29 bull market, following which share prices eventually halved. While there is a significant risk that history repeats itself again and Wall Street takes a tumble before the year-end, this bull market is not characterised by a bubble in equity valuations in the same way as before.

Judged in isolation the US stock market is now just as fundamentally expensive, and, hence, in just as dangerous territory, as during the two previous mega-bull phases, if not more so. In relation to any form of absolute shareholder value – dividends, earnings, cash flow, book values – share prices are as high or higher than they were just before the October 1987 crash. However, in both 1929 and 1987, the distortion in US and UK equity prices could be seen most clearly in the relationship between long- term interest rates or bond yields and equity valuations. This is not the case this time around.
Superficially, the current bond yield to dividend yield relationship in the US does appear to be in dangerous territory.

However, relative valuations appear neutral if account is taken of the decline in the pay- out ratio in the US to a record low. In the UK, too, relative equity- bond valuation measures remain firmly in neutral territory, with a yield ratio of 2 times compared to 3.3 times just before the 1987 crash.It may be, therefore, that current equity valuations are justified by today’s lower interest rates. When rates come down the return on keeping money in the bank falls. In these circumstances investors should value a given level of future earnings more highly.Bond yields may be thought of as having two components: an element which is necessary to compensate investors for what they think inflation is going to be; and the real interest rate. Arguably, equities should be more concerned with real interest rates because higher prices should partially feed through into higher profits and dividends. Empirical research confirms that this is the case.This brings us to possibly the main distortion in global financial markets at the present time.

Real bond yields have recently fallen below the levels seen in late 1993 to their lowest level since the 1970s. This owes much to the situation in Japan, where real bond yields have tumbled from around 5 per cent at the start of the decade to under 1 per cent currently, although real yields outside Japan have fallen in equally dramatic fashion recently.Sub-normal rates in Japan reflect its lack of appetite or inability to spend. In effect, Japan’s excess savings are financing the rest of the world’s financial markets, both bonds and equities. In this way, the current climate resembles that prevalent in the run-up to the bond-market crash of February 1994, when inflation risks were relatively low. A synchronised pick-up in economic activity, or expectations thereof, would soak up excessive liquidity and cause real yields to rise. This would cause problems for equities even if it were not accompanied by a pick-up in inflation.As for inflation, the process of economic and technological change in the 1990s has been inherently dis-inflationary. Costs have been stripped out of all stages of the production process.

Products and services are increasingly manufactured and sold on a world-wide basis, with the result that the competitive pressure to keep prices down has intensified. These changes have come on the back of 1980s measures to weaken the power of workers. The waves of global mergers and alliances currently taking place in the financial services, telecommunications, transport and defence sectors are a response to these trends New technology too has played its part. Greenspan’s Humphrey-Hawkins testimony discussed at length the impact on US productivity caused by computer and telecommunications technology, which may now have matured enough to genuinely add value. In as much as these productivity and margin gains are real and permanent, the rise of the US equity market in response is rational.The other great sea change in the 1990s has been the change in the conduct of fiscal and monetary policy Both the US and Europe have tightened fiscal policy In the US, politicians seem intent on balancing the budget.