So there is rationality behind stock prices rising when the economy s doing well. It s a truism of every great market top that things are compellingly rationale. Otherwise, people wouldn t buy. Never before has a dollar of dividend income, a dollar of corporate earnings, or a dollar of corporate net worth been quite so pricey by almost any measure. If people walk into Bloomingdale s, they look for low prices.
People walking into financial markets paradoxically seem to prefer high prices.
And the way you measure price in terms of stocks is what do you pay for a dollar of what corporations can offer, and what corporations can offer is their own net worth, what the stockholders own, what they pay out in income to stockholders called dividends, and what their profits are, called earnings. They certainly don t prefer those when shopping in a grocery store. So I think Chairman Greenspan is, you know, being a student of financial history, understands that there are moments in which people drive prices up and up simply because they are going up. People want index funds. That is to say, they want a basket of stocks comprising an index, and they want these stocks because they want to be in the market.