Why is it they always go to Wyoming to plan the next phase of consolidating their stranglehold on the rest of us. When will they be brave enough to go to El Paso or Brownsville, TX?
> -----Original Message-----
> From: owner-lbo-talk at lists.panix.com
> [mailto:owner-lbo-talk at lists.panix.com]On Behalf Of Doug Henwood
> Sent: Friday, August 27, 1999 11:31 AM
> To: lbo-talk at lists.panix.com
> Subject: Greenspan on stox
>
>
> [Greenspan's text is at
> <http://www.bog.frb.fed.us/BoardDocs/Speeches/1999/19990827.htm>.]
>
> Dow Jones Newswires - August 27, 1999
>
> Greenspan Says Soaring Stock Market
> Must Play Larger Role in Fed Policy
>
> JACKSON HOLE, Wyo. -- Federal Reserve Chairman Alan Greenspan said
> Friday that the "extraordinary" rise in U.S. stock prices over the
> last five years has distorted earnings calculations and must play a
> bigger role in the central bank's monetary-policy decisions.
>
> Mr. Greenspan said that as more household wealth gets tied up on Wall
> Street, it is becoming more difficult for investors to gauge the true
> value of the stocks in which they are investing. He cited the
> prevalence of accounting practices that obscure a company's labor
> costs and the market's vulnerability to "herd instincts," in which
> seemingly small events drive waves of investor optimism and pessimism.
>
> The U.S. market turned modestly lower late Friday morning following
> Mr. Greenspan's speech to a conference of international central
> bankers organized by the Kansas City Fed. In midday trading, the Dow
> Jones Industrial Average was down 61 to 11138 after losing nearly 128
> points Thursday.
>
> Mr. Greenspan said that as more people invest on Wall Street, the Fed
> has been confronted with the potential for the economy to exhibit
> "larger and perhaps more abrupt responses to changes in factors
> affecting the balance sheets of households and businesses."
>
> "As a result, our analytic tools are going to have to increasingly
> focus on changes in asset values and resulting balance-sheet
> variations if we are to understand these important economic forces,"
> he said.
>
> New technology, coupled with gains in productivity and a bull stock
> market, are "accentuating" accounting difficulties that tend to
> artificially inflate companies' balance sheets, Mr. Greenspan said.
> He estimated that the accounting of stock options has resulted in the
> overstatement of U.S. corporations' earnings by two percentage points
> a year.
>
> "It does not seem likely, however, even should all of the appropriate
> accounting adjustments to earnings be made, that such adjustments can
> be the central explanation for the extraordinary increase in stock
> prices over the past five years," Mr. Greenspan said.
>
> He warned about the unpredictability of the stock market, saying
> upturns and downturns are often driven by "small exogenous events."
>
> Given that uncertainty, he said, monetary-policy makers need to
> broaden their analysis of potentially risky investment behavior. An
> individual's degree of risk aversion, Mr. Greenspan said, "may vary
> over time and possibly be subject to herd instincts." The
> consequences of a sudden increase in risk aversion were "no more
> evident than in the crisis that gripped financial markets last
> autumn, following the Russian default," he said.
>
> "That episode of investor fright has largely dissipated," he said.
> "But left unanswered is the question of why such episodes erupt in
> the first place."
>
> His comments weren't the first time Mr. Greenspan has expressed
> concern about the high-flying stock market. In December 1996, he
> questioned the "irrational exuberance" of U.S. investors, causing a
> sharp, brief sell-off in markets around the world.
>