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To: Box-By-The-Riviera™ who wrote (178211)	7/8/2002 8:20:03 PM
From: UnBelievable	Respond to of 436258

WSJ(7/9)Column: Lower Stk Prices Will Cure What Ails US Mkts So you think the market will rally now that a solution to the problem has been identified.<gg> By James Grant (Editor's Note: Mr. Grant is the editor of Grant's Interest Rate Observer.) In his much-anticipated speech today on the crisis of confidence in U.S. financial markets, President Bush will probably neglect to prescribe the course of action that requires no new laws or regulations. What he is likely not to recommend is lower stock prices. If U.S. stocks were absolutely and unequivocally cheap, today's alleged crisis would be self-correcting. Having fled an overvalued market, people would be creeping back into an undervalued one. It would not matter so much that, in the previous boom, crooked companies had cost their credulous investors hundreds of billions of dollars or that Wall Street's analysts had actually analysed nothing. Low prices would afford doubting Thomases the kind of comfort that no government can legislate -- a margin of safety. --- Many will argue that stocks are, in fact, very cheap. They will claim that the rock-bottom federal funds rate makes it safe to invest in equities. But at 40 times trailing earnings and 19 times estimated earnings, the best that can be said for the Standard & Poor's 500 is that it is cheaper. It is a proverbial $20 hamburger, or $25 hamburger, a bargain only in comparison with the $100 sandwich. I'll gladly give you 2 hambugers tommorow for 1 hamburger today Now comes the call for more federal intervention -- more laws, more regulations and more market-pleasing stimulus from Alan Greenspan. Notice, however, what the extensive existing body of federal securities law (and the generous preceding monetary policy) did not forestall. They did not forestall what we have today. The government can no more restore confidence than it can impose virtue. Let value reign. On Wall Street, crises of under-confidence are usually preceded by crises of over-confidence. In the over-confident phase of the cycle, people stop reading the perfectly informative regulatory filings of the companies in which they invest. They may notice, but do not usually object to, gluttonous levels of executive compensation. And as for conflicts of interest, there is an exact alignment of interest. Investors, investment bankers, securities analysts and corporate executives all want one thing -- higher stock prices.