Alan Greenspan uses the term “irrational exuberance” to describe stock markets. The Standard & Poor’s 500 P/E ratio (Price to Earnings—that is, the market value compared to the company’s annual profits), which normally hovers around 15 for individual companies, with peaks ranging from 5 to 44, repeatedly reached 28 in the final months of 1996 (the S&P 500, therefore, considering 500 companies!), not far from the value of 33 it had in 1929 before the crash and the Great Depression.
