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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: Vendit™ who wrote (43681)	8/29/1999 9:36:00 AM
From: ayn rand	Respond to of 122087

Greenspan Laments Perils of High Stocks by Dean Patterson Bonds Writer Surely it's no coincidence that Fed chief Alan Greenspan issues a detailed discussion of the dangers of over-priced stocks, just three days after the central bank hikes rates and just two days after the Dow posts yet another all-time high. We?ve seen more than 30 new highs on the Dow this year. Market participants generally believe Greenspan and other central bankers worry about inflated stock prices. Those same market players believe the Fed isn?t going to keep hiking rates simply to let air out of equity prices. Greenspan calls rise in stock market inexplicable Fed Hikes, But May be Done for the Year That should probably fall under the category of good news. Now for potentially bad news: Fed watchers concede that Greenspan?s unusual remarks on Friday may be the start of a public campaign to talk some excessive exuberance out of the stock market. Greenspan?s remarks kicked off the annual monetary policy conference for central bankers and private economists in Jackson Hole, Wyoming. His openers in the past have tended to be "innocuous" beginnings of relatively academic gatherings, says Leonard Santow, co-founder of the consulting firm Griggs & Santow Inc. Santow is a former Fed economist and has attended many Jackson Hole conferences in the past. Greenspan seems to have more of an agenda this time, Santow speculates. "I do find this (statement) a little more pointed," he adds. "There is some intention in this." Ken Mayland, chief economist of Keycorp and a long-time Fed watcher, says the timing of these remarks is suspicious. A Fed chairman can go for years without mentioning stock prices, he notes. In a nutshell, Greenspan warns bubbles can burst; panic can cause all sorts of distortions in prices across asset classes; and market panics can come fast with almost no warning. He also seems to warn that many investors may not have as much protection built into their portfolios as they may think. Is this the beginning of a more vocal Greenspan on stock prices? Observers say only time will tell. One long-time market watcher says he hopes Greenspan does not make this a habit because over the long haul it?s impossible to talk the market either up or down, he says. He notes Greenspan made reference to inflated stock prices a few years ago when the Dow was a lot lower than it is now. In that case, the market was more optimistic about future growth in corporate profits than Greenspan was. And it was right, he adds. Santow says Greenspan is probably not trying to knock stock prices down, rather he is trying to keep certain stocks with sky-high multiples from climbing to the breaking point. In general, economists realize that stocks have ever more influence over the economy because they are taking up an ever greater part of household savings. That?s a natural consequence of several years of phenomenal growth in stock prices, Santow notes. That creates a very real problem for central bankers trying to slow growth. Consumers may care less about the level of interest rates and more about the value of their stock holdings and property values, which are also quite high now. In all fairness to Greenspan, if this is the biggest challenge for Fed officials right now, then he is obligated to address it ? even if it makes him look like someone not willing to let the collective wisdom of millions of investors take its course. Based on countless remarks through the years, Greenspan is probably more inclined over the long term to let the market finds it own way. cnbc.com