A Quote by Alan Greenspan
Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices, ... This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.
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History has not dealt kindly with the aftermath of protracted periods of low risk premiums.
Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?
What we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself - a rental property, office building, condo - does not cover the debt incurred to buy the asset. So you depend on a greater fool, if you will, to come in and buy at a higher price.
In the richest country in the history of the world, this Obama economy has crushed the middle class. Family income has fallen by $4,000, but health insurance premiums are higher, food prices are higher, utility bills are higher, and gasoline prices have doubled. Today more Americans wake up in poverty than ever before.
Interest rates are to asset prices what gravity is to the apple. When there are low interest rates, there is a very low gravitational pull on asset prices.
In June 2005, mortgage rates were at 40-year lows, and risk premiums on mortgage securities were at all-time lows. Once the banks migrated to the subprime area, there was little else that could be done to send housing prices higher.
Network marketing gives people the opportunity, with very low risk and very low financial commitment, to build their own income-generating asset and acquire great wealth.
In the 40 years I've been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality... Asset markets are in the sky, and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.
I pay higher premiums because my speeding points spell 'recklessness' to the insurance company, but you can't imagine how risk-averse I am at the wheel. I only go over 30 at all because it's dangerous to drive too much slower than everyone else.
Higher asset prices increase wealth and, with a lag, induce higher spending.
I've lived through periods of illiquidity before. Asset prices come down. The economy slows or even goes into recession. Then the cycle re-starts. We buy at lower prices with less leverage.
Digital Asset has a revolutionary technology platform that eliminates the counterparty risk and lack of transparency that has hindered mainstream adoption of cryptographic technology. The possibilities for reducing cost and risk in settlement are enormous.
If the investor doesn't have enough time and skill to investigate individual stocks or enough money to diversify a portfolio, the right thing to do is to invest in exchange-traded funds that give you exposure to asset classes. It does make sense for the individual investor to think in terms of holding individual asset classes.
To prefer paper to gold is to prefer high risk to lower risk, instability to stability, inflation to steady long term values, a system of very low grade performance to a system of higher, though not perfect performance.
When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.
We can extrapolate from the study that for the long term individual investor who maintains a consistent asset allocation and leans toward index funds, asset allocation determines about 100% of performance.
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