No Reliable Barometer of Volatile Market

I almost dismissed your analysis “Fed Chief Now Blamed for Inflating Stock Bubble” [July 21] as just another benighted misjudgment of the reasons for the current decline in the stock market, because every commentator, analyst and economist from Alan Greenspan on down has it all wrong. You, though, have it all right.

Greenspan may or may not be responsible for the inflation and collapse directly, but you are right on when you say “... share prices were driven to stratospheric heights by the hope of further gain, rather than remaining tethered to something fundamental like a company’s profits.”

This is exactly why both President Bush and Greenspan completely miss the point in talking about the stock market turning around because the economy and productivity are good. The time is long since past when that had any relevance whatsoever.

That truth was tacitly acknowledged when the market and the analysts began to look not to how well the individual companies were doing to predict what the market would do, but to what interest rate the Fed would set.

That barometer wore out, though, when the Japanese dropped the interest rate to zero and their stock market continued to decline.

The fact is that the stock market will go up when the stock market goes up. This is true because nobody, or at least very few, invests in stocks because a particular company is being more efficient, has a great new product or a great new CEO.

Bill McKim

Sun City