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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: nextrade! who wrote (27297)2/18/2005 4:09:37 AM
From: Amy JRead Replies (3) of 306849
 
Nextrade, Greenspan is not concerned about the declining savings rate (which is at 1%), while he ironically complains about the Soc Sec problem:

Greenspan: "The sizable gains in consumer spending of recent years have been accompanied by a drop in the personal saving rate to an average of only 1 percent over 2004--a very low figure relative to the nearly 7 percent rate averaged over the previous three decades."

My personal favorite quote:

Greenspan: "the decline in saving...have spurred rising household wealth and allowed greater access to that wealth....cash realized from capital gains has the same spending power as cash from any other source.

Basically he's saying, the decline in savings has increased household wealth so your house can be an ATM machine.

Another favorite quote: "Yet history cautions that people experiencing long periods of relative stability are prone to excess. We must thus remain vigilant. "

But the rest of his talk is very good - business managers are more risk-adverse than investors, suggested inflation will increase if productivity rate doesn't increase more, wages will probably go up (and they are), firms will need to hire and increase capital spending to minimize inflationary labor costs.

He said, "Both realized and option-implied measures of uncertainty in equity and fixed-income markets have declined markedly over recent months to quite low levels."

Maybe this explains why the risk premiums on some of the options (for writing covered calls) are no longer as attractive.

Greenspan: "if not addressed, could begin to affect longer-dated debt issues, the value of which is based partly on expectations of developments many years in the future."

In which direction? A near-devaluation slowdown like Japan is having or will it be an increase in inflation due to increasingly high deficits to pay for the wars and socsec.

Why did the long-term interest rates decline last year after short term rates increased - what does that suggest?

Regards,
Amy J
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