There's much more going on than we know or get from the press. This is from the NEM board.
WHAT'S KEEPING
GREENSPAN AWAKE AT
NIGHT?
By JOHN CRUDELE
ALAN Greenspan is petrified about the stock market
bubble but doesn't know what to do about it.
No, Greenspan isn't suddenly becoming chatty - at
least not with the press. But Lawrence Lindsey, who
worked alongside Greenspan at the Federal Reserve
until 18 months ago, is having more luck breaking
through Greenspan's mumbo jumbo.
Lindsey, who recently wrote a book called "Economic
Puppetmasters" (The AEI Press) told me over a cup
of coffee the other day that Greenspan "wants to
prevent a market collapse. But he doesn't want the
market to go any higher."
Lindsey believes the stock market is too high in price
and extremely vulnerable. And he thinks that the
current impeachment process, if it actually puts the
president in jeopardy, could be very damaging to
stock prices. (I'll tell you what I know later.)
Does Greenspan understand the vulnerability of the
economy? "Yes," says Lindsey, who currently toils as
managing director of Economic Strategies Inc. in
Washington. "He's quite worried about the bubble in
the stock market. If the bubble bursts the U.S.
consumer will stop spending and the U.S. and world
economies will be in trouble."
That, says Lindsey, is what happened in 1929.
In his book, Lindsey quotes Greenspan as saying to
him: "There are all sorts of parallels to the late 1920s.
But you have to be a little careful about the
1929-1932 analogies. The problem is that if actions in
1930 and 1931 were taken differently, we might have
had a fairly significant recession, but we would not
have had the deep fall that we know as the Great
Depression."
The former Fed governor believes - and says
Greenspan agrees - that U.S. consumers are being
kept going by the exuberant stock market. "We are
spending more than our incomes in part, because we
are feeling rich" because of the market, Lindsey says.
Lindsey himself thinks the stock market's behavior is
troubling. "I think price-to-earnings ratios are very high
and there will be (corporate) profit disappointments
over the next year," he says.
If the market were to ignore these bad earnings, "it will
become more and more divorced from reality."
The economist also believes that the impeachment
process - totally ignored so far by Wall Street - could
be a crippler for the market. "If it looked like the
president was in a protracted battle for his political life,
it would have a very chilling effect on the market," he
believes.
"It would raise uncertainty and create doubt about the
future course of policy," Lindsey said of the
impeachment. "The problem will be one more of
appearances, because in fact, policy won't change."
Here's what I know and what I told Larry Lindsey
over that cup of coffee.
The Republicans in the Senate know a lot more about
President Clinton's behavior than has come out. Some
of the information, I'm told by a very reliable source, is
coming from people close to the White House.
And more information has been delivered by people
described to me by my source only as "wanting to do
their duty."
I've predicted in this column before that President
Clinton is in serious trouble. I wrote those words back
when nobody even considered congressional hearings
possible, much less believed that an impeachment
process would get this far.
Based on these recent conversations and others that I
can't fully detail here, I'm even more convinced that
Bill Clinton's presidency is on the brink of disaster.
Remember, Ken Starr investigated Bill Clinton's
personal behavior, not just his sexual behavior. It
wouldn't take the Republicans long to track down
some of this information and bring all sorts of things up
during the Senate trial.
And both Larry Lindsey and I would agree that the
political situation in Washington could be the biggest
bump that'll shake Wall Street's complacency.
*
Consumers spending?
Not according to retailers and manufacturers who still
tell me that only highly discounted items are moving well.
But sales on the Internet, where the novelty still hasn't
worn off, are an exception.
The latest Internet success are Speedos, the
abbreviated bathing suits that are selling well over their
new website.
Owner Authentic Fitness, I'm told, did a brisk
business on the first two days without any publicity.
Another K-Tel? You never Can-Tel. |
