The Return to Irrational Exuberance
March 2, 2009, 11:32 am Floyd Norris
norris.blogs.nytimes.com
Another stock market milestone was reached last week, when the S.&P. 500 fell under the Dec. 5, 1996, close of 744.38. The Dow, for what it is worth, is still above the 6,437.10 level it sported then.
(As I write this, the S.&P. is at 714 and the Dow at 6,880.)
That night Alan Greenspan uttered his legendary “irrational exuberance” comment. It was actually a question:
”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?”
Mr. Greenspan’s comments unsettled the stock market. The Dow fell 55 points the next day, which seemed like a lot at the time. But the bull market soon continued, and Mr. Greenspan stopped worrying. By the spring of 2000, he was quoting Wall Street analysts to justify high technology stock prices.
For what it’s worth, there are five stocks now in the Dow that trade for more than twice their level when Mr. Greenspan spoke, and six that trade for less than half as much. (Prices are through about 11 a.m. today.)
The winners:
Wal-Mart, up 282%
Exxon Mobil, up 180%
United Technologies, up 136%
I.B.M., up 130%
McDonald’s, up 120%
The losers:
General Motors, down 95%
Citigroup, down 89%
Bank of America, down 86%
Alcoa, down 63%
DuPont, down 63%
General Electric, down 52% |
