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Bruce Greenwald is the professor of
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economics and finance at Columbia
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University of Robert harbor and
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professor of economics and finance
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Bruce has also been recognized across
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all of wall street as the Guru to the
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gurus and so we are delighted that he’s
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here with us today so Carl Icahn has
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said that what’s going on right now is
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in effect a replication of what took
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place in 2007-2008 and in fact the
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market is about to go off a cliff and
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that people are going to find themselves
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and dramatically worse shape going
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forward than they did at that point time
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and I want to have you about that
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ok so let’s talk about that in detail ok
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the first thing is that the valuations
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are actually not as rich as they were in
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two thousand that’s based on PE yeah
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second thing is that the craziness where
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nobody thought there was any risk so
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that for example in 2007 you could buy
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credit default swaps on dubai sovereign
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down the riskiest region in the world
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dependent on the most unstable commodity
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in the world which is oil for four basis
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points which is 1 in 2,500 years they’re
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going to go completely under so that
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craziness is not in the market
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the real issue is the earnings power of
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these companies so that if you look at
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people like Jeremy Grantham sure who has
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been now 49 years doing the car like am
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your story their view is that these
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earnings levels are not sustainable and
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what you’ve seen is that is a share of
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total US income corporate profits which
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pre-1990 were about 8am percent are now
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around 13 and after 14 so there’s been
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this huge increase in profits if that
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increase in profits is sustainable and
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it’s likely to continue then we may have
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a flat market for a while we may not
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have the kind of
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increase in prices that we’ve had but
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we’re probably not going to see the kind
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of crash we saw in 2008-2009 now I think
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that profits are going to stay where
