Greenspan (Greenscum) says global economy faces asset price fall

This is the same guy who doesn't know a bubble when he sees one, until after it has burst. Now he's out there flapping his lips about how everything is grossly overvalued. But of course he doesn't talk about the role he and his central banker buddies have played in creating the mess we are in.

Global economy faces asset price fall-Greenspan
Tue Apr 11, 2006 11:41 PM ET

SEOUL, April 12 (Reuters) - Former Federal Reserve Chairman Alan Greenspan warned on Wednesday a global glut in liquidity would result in a fall in asset prices.

Greenspan, speaking to a financial conference in Seoul via satellite, also said separately that a U.S. law on corporate governance may have influenced some foreign companies to seek initial public offerings outside the United States.

He said the market value of assets worldwide had been rising faster than nominal gross domestic product globally due to a decline in real long-term interest rates over the years and a significant fall in real equity premiums.

"A good part of this expansion is a direct function of the decline in real equity premiums," Greenspan said. "That cannot go on indefinitely."

He said asset prices would begin to fall, but did not predict when that would happen.

"I am reasonably certain that what we are looking at today is an abnormal situation," he said.

Greenspan also said the Sarbanes-Oxley corporate governance act in the United States was a definite advance in terms of corporate governance, but some sections created too many burdens for corporations.

"The Sarbanes-Oxley act has created significant problems for foreign investors with its regulatory structure," he said.

"I am nevertheless acutely aware and disturbed by the fact that initial public offerings have moved away from the U.S. -- and to a large extent have moved to London," he added.

South Korean retailer Lotte Shopping Co. (023530.KS: Quote, Profile, Research) listed in Seoul and London early this year in the world's largest retail IPO, partly because of heavy reporting requirements for U.S. listings.

The former Fed chairman, who stepped down earlier this year, said his impression was that there would be changes in the act.

The Sarbanes-Oxley law was passed by Congress amid accounting schemes that resulted in the collapse of energy trader Enron and telecommunications giant WorldCom.

Asked whether he thought there was "irrational exuberance" in markets today, Greenspan said: "I would hesitate to use it in today's context. Irrational exuberance, I think would be a stretch at this point."

He had previously used the term to suggest signs of a bubble emerging in financial markets in the late 1990s.

The Housing Market has reached a plateau

4/12/2006

Home sales should generally level out and remain at historically high levels, according to the National Association of Realtors.

David Lereah, the NAR's chief economist, says mortgage interest rates are trending up but will remain favorable. "Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect," Lereah said.

"Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record." He expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year.

Growth in the U.S. gross domestic product is forecast at 3.7 percent in 2006, while the unemployment rate should average 4.8 percent.

Existing-home sales are projected to drop 6.0 percent to 6.65 million this year from a record 7.08 million in 2005. New-home sales are likely fall 10.9 percent to 1.14 million from the record 1.28 million last year - both sectors would see the third best year following 2005 and 2004. Housing starts are forecast at 2.00 million in 2006, which is 3.2 percent below the 2.07 million in total starts last year.

NAR President Thomas M. Stevens from Vienna, Va., says home prices are expected to cool, but not as much as in earlier projections. "Although housing inventories have been improving, the balance is still a bit more favorable for sellers and annual appreciation remains in double-digit territory," said Stevens, senior vice president of NRT Inc. "Even so, the market is in a process of normalization - appreciation will return to normal single-digit patterns, providing solid investment returns into the future."

Remember that statement about reaching the plateau. It's a dead ringer for another statement about a stock plateau in 1929.

Dollar is Now a Faith-Based Currency

Gee, doesn't that make you feel so much better about the fate of the US dollar?

DALLAS, April 11 (Reuters) - The Federal Reserve will do what it takes to maintain its credibility, which is central to preserving the integrity of the U.S. dollar, Dallas Federal Reserve Bank President Richard Fisher said on Tuesday.

Alluding to the Fed's dual role of ensuring inflation doesn't "raise its ugly head" while still promoting the fastest possible noninflationary growth, Fisher said, "We seek to get it right. And the answer to your question is we will do what gets it right."

Answering audience questions after a speech to the Dallas Friday Group, Fisher said the U.S. dollar is a "faith-based currency" dependent on the credibility of a central bank.

"In addition to a faith-based currency, we are the currency of the world and we must maintain its integrity. As far as my involvement is concerned, I will spend every ounce of energy doing that. I have no doubt that my colleagues will do exactly the same," Fisher said.

Fed sees nothing but blue skies.

According to Fed Jeffrey Lacker, president of the Richmond Federal Reserve Bank, April 4, 2006:

"It has now become uncontroversial to say that the outlook for overall economic activity is quite healthy," Lacker said. Although there will be some moderation in the housing sector this year, this "will not pose a problem for overall activity this year or next...Both survey data and the market prices of inflation-protected Treasury securities tell us that the public expects inflation to continue to be contained. I am confident that we at the Fed have the knowledge and the will to validate those expectations."


I was blue, just as blue as I could be
Ev’ry day was a cloudy day for me
Then good luck came a-knocking at my door
Skies were gray but they’re not gray anymore

Blue skies
Smiling at me
Nothing but blue skies
Do I see

Bluebirds
Singing a song
Nothing but bluebirds
All day long

Never saw the sun shining so bright
Never saw things going so right
Noticing the days hurrying by
When you’re in love, my how they fly

Blue days
All of them gone
Nothing but blue skies
From now on

[2]
I should care if the wind blows east or west
I should fret if the worst looks like the best
I should mind if they say it can’t be true
I should smile, that’s exactly what I do

Irving Berlin