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Why You Should Be Worried Alan Greenspan Says Market Will Keep Going Up

His housing market bubble predictions did not give the market loads of confidence in him


Former Federal Reserve Chairman Alan Greenspan is predicting that the stock market will continue to go up — even to record levels.

But based on Greenspan’s history, there may be a reason to worry about his speculation.

“In a sense, we are actually at relatively low stock prices,” Greenspan said in an interview with Sara Eisen on Bloomberg Television yesterday. “So-called equity premiums are still at a very high level, and that means that the momentum of the market is still ultimately up.”

Greenspan pointed out that the stock market is “just barely above 2007” — which he says opens up the possibility for a huge rise.

While the potential for growth is undoubtably real, here is one reason to reconsider (via Gawker):

Greenspan in 2004: “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.”

Greenspan in 2005: “Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets.”

Greenspan in 2005: “The resolution of our current account deficit and household debt burdens does not strike me as overly worrisome.”

The housing bubble then burst and the economy tanked.

Greenspan in 2008: ““I still do not fully understand why it happened.”

Greenspan to Bloomberg, 2013: “In a sense, we are actually at relatively low stock prices… [the market has] gone up a huge amount, but it’s not bubbly.”

Based on that history, investors are likely taking Greenspan’s current prediction with a grain of salt.

Meanwhile, the Standard & Poor’s 500 Index increased 23.03% through the year (up through yesterday), so it’s on par with its 23.5% surge in 2009.

This of course comes as insiders say the Fed will put off cuts to its monthly bond purchases until the market improves.

Article printed from InvestorPlace Media, http://investorplace.com/2013/10/alan-greenspan-stock-market-increase/.

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