Irrational Exuberance

Paul Krugman points out that the stock market has now fallen below the level it was at when Federal Reserve Chairman Greenspan felt it necessary to warn that it was too high, with his “irrational exuberance” remark. Krugman writes, “Our economic problems are real, but by no means catastrophic. What scares me is the utter inflexibility of the people who should be solving those problems.” What would Cinton do?

The current PE ratio of the S&P 500 is 22.1. Still high, and the E (earnings) is based on accounting that is not necessarily credible.