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Non-Tech : Greenspan, Rubin & Co - the Most Irresponsible Team Ever?? -- Ignore unavailable to you. Want to Upgrade?

To: Copeland who wrote (115)	2/1/1999 9:23:00 AM
From: Cynic 2005	Read Replies (2) \| Respond to of 309

WHY NO ONE BELIEVES GREENSPAN ANYMORE By JOHN CRUDELE -------------------------------------------------------------------------------- IF investing in Internet stocks is like buying a lottery ticket, then putting your money into a bloated stock market that has a price-to-earnings ratio higher than ever is like buying a ticket to a raffle that was held two weeks ago. I'm glad Alan Greenspan finally used gambling analogies last week when he said, "What lottery managers have known for centuries is that you could get somebody to pay for a one-in-a-million shot more than the (pure economic) value of that chance." He was talking about the craziness going on with Internet stocks. He said people were willing to pay a "lottery premium" for them because one might hit it big. In other words - if I may put Greenspan's words in even plainer English - people are greedy, willing to gamble, they know there is a price, and that's why Internet companies that produce no earnings and probably never will are being improbably valued at billions of dollars. But the gamblers know something else. They know the game is fixed because if they lose, Greenspan loses. Alan Greenspan can squawk all he wants about this dangerous Internet craze, but there isn't a thing he will do about it. The Federal Reserve - which is supposed to guard the nation's financial integrity - has been reduced under Mr. Greenspan's regime to covering its bureaucratic rear by going on the record with warnings that can later be used for so many worthless I-told-you-so's. It's a casino - or a lottery - and Greenspan is the guy who has been feeding booze to the players so they won't act rationally. Wall Street ignored Greenspan's warnings again Friday. Not a surprise. The investment gang did the same on Thursday, and has for several years. The Fed chairman has made himself irrelevant and the Fed expendable as the financial police force. If Alan Greenspan wants to have an impact, the investment community is saying, let him raise interest rates. "We dare him. He doesn't have the nerve - not with his boss Bill Clinton in so much trouble and chaos brewing around the globe." They are right. If Greenspan takes them down, he goes down with them. You might remember that when his first term was ending a few years ago, he begged Bill Clinton for reappointment. Greenspan came to the Fed's chairmanship under Ronald Reagan, and he's a Republican, so there was serious doubt he'd stay. I don't know what deal Greenspan made, but he has been a pushover in the first years of his second term. He has allowed the nation's money supply to rise so swiftly, that the excess liquidity was naturally destined for the stock market. People had too much money and found a new form of entertainment - gambling on the stock market. And the more liquidity Alan Greenspan provided, the higher the market went . Greenspan was betting the market-driven economy would keep people intoxicated. And this would all happen without runaway inflation. In some ways, that dream materialized. The price of "things" - TV sets, food, oil - has not risen by much. But the price of investments - "asset inflation," the few sober pros on Wall Street call it - has seriously altered the nation's financial structure. People today count on their investments to provide money on which to live. Salary increases are less important - give people a 20-percent increase in the price of their Internet stocks in a week and they don't need an extra buck an hour. With so much of the economy beholden to the stock market it is too late for Greenspan to act. Wall Street knows it. And every time the stock market rises after a Greenspan warning, the investment community thumbs its collective nose at the old man at the Fed. This time he didn't take on the market's valuations, as he did before Congress a few weeks ago. And there was no talk of "irrational exuberance," his phrase of a few years back.A chastised Greenspan has even given up having his Fed lackeys tell the media there's a bubble in the market. Last week Greenspan took the indirect approach - through the obvious excesses in Internet stocks. Nice try, Alan. But again, he came up short. Greenspan should be complaining that the whole market is a gambling hall full of drunk investors. He should take the punch bowl away. Get the nation's money supply back to rational levels and tell people they'll have to work, not gamble, to earn a living. The price-to-earnings ratio for the whole market is at 32-to-1. The previous high was 26-to-1, and that came during a time when the country was turning optimistic after bad economic times. That, Mr. Greenspan, is also the "lottery premium" people are paying to gamble in this stock market. It isn't just Internet stocks. There is a stock market bubble. People are throwing their money into a Ponzi scheme. The pyramid will continue to grow as long as the liquidity lasts and not a day longer. Greenspan can't matter-of-factly blame others for the perilous casino atmosphere that now pervades Wall Street if he's the guy handing out the dice. nypostonline.com