Greenspan has proven again and again to be a clueless moron when it comes to calling the market and by his own admission said he had no idea of the market bubbles that grew when he was in charge of monetary policy. In 2009 he called the “top” in the stock market, which actually kept on rallying until today – 3 years later. Either he is criminally incompetent or just a complete fool, but Bloomberg keeps on reporting what he has to say. Why?
Former Federal Reserve Chairman Alan Greenspan said U.S. stocks offer good value and are likely to rise as corporate earnings increase over time.
“Stocks are very cheap,” Greenspan said today at the Bloomberg Washington Summit hosted by Bloomberg Link, citing “very low price-earnings ratios.”
“There is no place for earnings to grow except into stock prices,” said Greenspan, who served as Fed chairman from August 1987 to January 2006.
Stocks have rallied on better-than-forecast corporate profits and signs of economic strength. The Standard & Poor’s (SPX)500 Index has risen more than 12 percent this year, the best start to a year since 1998.
The index rose 1 percent to 1,411.57 at 11:15 a.m. in New Yorkafter a report showed that U.S. manufacturing unexpectedly expanded in April at the fastest pace in 10 months.
The S&P 500 trades for 14.3 times reported income from its companies, or 13 percent below the average since 1954, according to data compiled by Bloomberg News.
Another valuation metric, known as the Fed model because it was derived from a July 1997 report from the central bank, shows U.S. equities are close to the cheapest level ever relative to debt. The technique compares the earnings yield for stocks with Treasury rates.
– Dean Mitchell