Greenspan sez....

[Henry C.K. Liu]

I think Greenspan is merely protecting his rear for history, so that when the
crash come, he would be able to say he warned the world.
I was talking with some traders last night who live on the front line.
They are all hedged in a way that with each day of rise in the DOW, they stay
ahead enogh to face being caught at the exit door the next day. At least they
is what they think.
It is probably true that their clients will still be ahead if the Dow suddenly
drops to 8000.  But many of these client have spent the gain on other assets,
so to stay even, a lot of selling will have to take place to cover.
It seems to me that the US has been translating all the global deflation into
inflation in the US equity and real estate markets and calling growth.  On a
global basis, there has been negative growth since July 1997.

Henry

Henry

Doug Henwood wrote:


> Rob Schaap wrote:
>
> >Greenspan's blather about tight 'labour markets' and inflation (and
> >interest rate hikes in June) has scared the guts out of the Oz markets
> >today.  I'd take a couple of mill. out in cash if I were you lot - first
> >thing.
> >
> >Methinks the bloke is experimenting with the idea of gently pricking a
> >bubble ...
>
> Yeah, he tried that about 6,000 Dow points ago, with his tortured
> "irrational exuberance" remark.* Didn't work very well, did it?
>
> Doug
>
> ----
>
> *AG, 12/5/96: "Clearly, sustained low inflation implies less uncertainty
> about the future, and lower risk premiums imply higher prices of stocks and
> other earning assets. We can see that in the inverse relationship exhibited
> by price/earnings ratios and the rate of inflation in the past. But how do
> we know when irrational exuberance has unduly escalated asset values, which
> then become subject to unexpected and prolonged contractions as they have
> in Japan over the past decade? And how do we factor that assessment into
> monetary policy? We as central bankers need not be concerned if a
> collapsing financial asset bubble does not threaten to impair the real
> economy, its production, jobs, and price stability. Indeed, the sharp stock
> market break of 1987 had few negative consequences for the economy. But we
> should not underestimate or become complacent about the complexity of the
> interactions of asset markets and the economy. Thus, evaluating shifts in
> balance sheets generally, and in asset prices particularly, must be an
> integral part of the development of monetary policy. "