Touching on homes and Herbert Hoover

By DAVID MOON, Moon Capital Management
February 29, 2004

Federal Reserve Board Chairman, Alan Greenspan, spoke to the Credit Union National Association last week. I didn't think he looked so good. He looked a lot older than the other soon-to-be 78-year-olds I know, but I guess he gets a bit worn carrying around the weight of the entire world economy on his shoulders. (Greenspan's birthday is this week, if you want to send a card.) Television can do that to you, making you look worse than you do in real life. I used to be on television once a week and I firmly believe the camera makes you appear 80 or 100 pounds heavier than you actually are. That's my story and I'm sticking to it.

As usual, Greenspan's comments made news headlines. But I was disappointed in the comments most papers featured. Greenspan discussed a recent Federal Reserve Board report showing that many homeowners could have saved tens of thousands of dollars during the last decade if their mortgage rates had been adjustable rather than fixed.

I hope no one spent a great deal of time preparing this report.

Consumers would obviously save money if their mortgages carried adjustable rates - at least during a period of generally declining interest rates. That's what we've had over the last ten years: generally declining mortgage rates. This report is the equivalent of discovering that investors would have made more money investing in stocks, as long as they only did so when stock prices were increasing. It's not brain surgery and I usually expect a bit more from Alan.

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Speaking of expecting a bit more from someone, I have a confession. Last week, I made a reference to the performance of the stock market during 1932, the last year of the Calvin Coolidge administration. The only problem is that Herbert Hoover was president in 1932. I appreciate all of the readers who were quick and kind enough to detect the error.

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Other readers were a bit more vicious in their comments last week. One gent from Crossville wrote that my column was so full of misleading statements it qualifies me to be Secretary of Offense. (Watch out Randy Sanders.) As proof, he offered that I completely ignored that 60 percent of our national debt was accumulated during the administrations of three republican presidents. Although I haven't verified the claim, it is irrelevant to my conclusion. During the 14 years of Reagan, Bush and Bush, the average annual S&P 500 return was 10.69 percent - almost exactly in line with the historic return of the index, irrespective of presidential party affiliation. Presidents have an awful lot of power, but not on Wall Street ' not in the long-term, anyway.

The same reader argued that the US has gone to hell since Bush 43 took office on January 20, 2001. After watching a young man give his umbrella to a stranger - a very pregnant woman - during a rainstorm Wednesday morning, I disagree with that assertion, as well.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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