>This is what the Wall St. Journal quotes Greenspan as saying at New
>York University yesterday: "We have to be careful ... not to look
>to a significant expansion of regulation as the solution to current
>problems, especially as price/earnings ratios increasingly reflect
>the market's perception of the quality of accounting. Regulation
>has, over the years, proven only partially successful in dissuading
>individuals from playing with the rules of accounting."
The transcript of AG's deathless words is at <http://federalreserve.gov/boarddocs/speeches/2002/200203262/>. There's this gem too:
>But, as we can see from recent history, long-term earnings forecasts
>of brokerage-based securities analysts, on average, have been
>persistently overly optimistic. Three- to five-year earnings
>forecasts for each of the S&P 500 corporations, compiled from
>projections of securities analysts by I/B/E/S, averaged almost 12
>percent per year between 1985 and 2001. Actual earnings growth over
>that period averaged about 7 percent.
>
>Perhaps the last sixteen years, for which systematic data have been
>available, are an historical aberration. But the persistence of the
>bias year after year suggests that it more likely results, at least
>in part, from the proclivity of firms that sell securities to retain
>and promote analysts with an optimistic inclination. Moreover, the
>bias apparently has been especially large when the brokerage firm
>issuing the forecast also serves as an underwriter for the company's
>securities.
No kidding, Alan. No wonder you're the greatest central banker of all time!
Doug