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To: T L Comiskey who wrote (12537)	4/11/2001 9:52:02 AM
From: T L Comiskey	Respond to of 13572

AG...an AH...??? Maybe yes...maybe no Greenspan blamed for bubble Fed chairman encouraged 'irrational exuberance' among investors Charlotte Denny Tuesday April 10, 2001 The Guardian The fond belief that Alan Greenspan, venerable chairman of the US Federal Reserve Board, is a superman who can prevent a crash inflated American stocks to twice their fair value last year, economic researchers are warning. Although US stocks have lost $4 trillion since the height of the Greenspan "bubble" last March, the market is still overvalued by $3.5 trillion, according to Professor Marcus Miller of Warwick University and his colleagues. "There will be a market crash when investors realise that Mr Greenspan is not superhuman," he will tell his colleagues at the Royal Economic Society's annual conference in Durham today. Prof Miller said US investors ignored the risks and piled into stocks because they believed that Mr Greenspan would bail out the market if it nosedived - precisely the kind of "irrational exuberance" which the Fed chairman warned against in a landmark speech four years ago. Despite his warning, Mr Greenspan encouraged the exuberance, according to Prof Miller, because he failed to take a tough line after his speech. Mr Greenspan cut interest rates twice in the space of six weeks during the Russian debt default crisis in autumn 1998, which led investors to believe that he would always act to prevent sharp falls in share prices. Exaggerated faith in Mr Greenspan caused investors to discount the risks of investing in shares and sent the market soaring. Prof Miller estimates that the wider measure of US shares, the S&P 500 index, which has fallen by 400 points from its high of 1500 last March, needs to lose a further 350 points. Such a fall would bring it back to the level it stood at in December 1996, when Mr Greenspan made that speech. According to Prof Miller, four years of subsequent economic growth means that this is now a fair value for the US market. Prof Miller's paper has been discussed by senior central bankers on both sides of the Atlantic. The Bank of England has held a seminar on the paper and the Fed asked for a copy of the preliminary version a year ago. A further crash is not inevitable, if the Fed chairman could gradually bring investors to their senses. "Mr Greenspan would confirm his status as a great central banker if he can do it," said Prof Miller.