Off the Mark.In testimony before the Senate Banking Committee last week, Fed Chairman Alan Greenspan Alan Greenspan Dr. Greenspan is Chairman of the Board of Governors of the Federal Reserve System. Dr. Greenspan also serves as Chairman of the Federal Open Market Committee (FOMC), the Fed's principal monetary policymaking body. warned that bank loans are deteriorating, economic growth is stalling and corporate earnings are evaporating. A somber assessment indeed. But Milken Institute President Donald Straszheim, in a speech last week at the Four Seasons Hotel in Beverly Hills Beverly Hills, city (1990 pop. 31,971), Los Angeles co., S Calif., completely surrounded by the city of Los Angeles; inc. 1914. The largely residential city is home to many motion-picture and television personalities. , pointed out that Wall Street valuations - even after the recent broad sell-off - are actually much higher now than when Greenspan made his famous "irrational exuberance Irrational Exuberance An infamous phrase uttered by Alan Greenspan in 1996 to describe the overvalued market at the time. Notes: Although every word spoken by Mr. " speech on Dec. 5, 1996. On that day the Dow stood at 6437, the Nasdaq at 1300 and the price/earnings ratio of the S&P 500 at 20.7. As of last week, the Dow had risen to 10,645, Nasdaq to 1988 and the S&P 500 P/E ratio P/E ratio Current stock price divided by trailing annual earnings per share or expected annual earnings per share. Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25.50 = 10 times $2.55. XYZ stock sells for ten times earnings. to 28.1. |
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