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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: DownSouth who wrote (19039)2/29/2000 3:36:00 PM
From: freeus  Read Replies (3) of 54805
 
Here's the exact section from Greenspan's speech:
Thanks for the link given me here. Not hard to interpret it as the reporters reported. What is your interpretation?
"As would be expected, imbalances between supply and potential supply in markets for goods and services are being mirrored in the financial markets by an excess in the demand for funds. As a consequence, market interest rates are already moving in the direction of containing the excess of demand in financial markets and therefore in product markets as well. For example, BBB corporate bond rates adjusted for inflation expectations have risen by more than 1 percentage point during the past two years. However, to date, rising business earnings expectations and declining compensation for risk have more than offset the effects of this increase, propelling equity prices and the wealth effect higher. Should this process continue, however, with the assistance of a monetary policy vigilant against emerging macroeconomic imbalances, real long-term rates will at some point be high enough to finally balance demand with supply at the economy's potential in both the financial and product markets. Other things equal, this condition will involve equity discount factors high enough to bring the rise in asset values into line with that of household incomes, thereby stemming the impetus to consumption relative to income that has come from rising wealth. This does not necessarily imply a decline in asset values--although that, of course, can happen at any time for any number of reasons--but rather that these values will increase no faster than household incomes.

Freeus
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