Carl,
Your point about margin in 1929 is certainly well taken. But Greenspan didn't label the market as suffering from from "irrational exuberance". His comment was framed as a question that ran something like, "How can we tell when a market is suffering from irrational exuberance rather than sound fundamentals?" That isn't an exact quote, but it was more like that than it was a label. It was widely misinterpreted at the time, and still is. Also, as I recall, the market was around 6400 or 6500 at the time. But even that is irrelevant; interest rates are much lower now than they were then. Of course, if we are indeed entering a deflationary period, rates will get still lower, much lower, and it won't help the market much. The cause of this deflation won't be so much a restrictive money supply, but blind overbuilding in developing countries, especially in Asia, without regard to return on equity, profit, or, in short, economic reality. We shall see. |
