‘American Plutocrat’

The buyout of England’s Manchester United football club by an American may lead to overwrought reactions across the pond, but New York Sun writers aren’t correct in their attempts to analogize the situation to the U.S.

Daniel Johnson’s May 17 London Letter “American Plutocrat,” writes that it’s like a European zillionaire buying the New York Yankees; Paul Gardner’s otherwise excellent columns on soccer posits, “How would the Americans feel if Richard Branson took over the Yankees?” [“Glazer’s Man U Takeover Provokes English Outrage,” Sports, May 17, 2005]. The answer to this hypothetical question is that Americans would barely care at all: We are used to rich types squandering their money as they see fit.

More specifically, a European’s taking over the Yankees would probably be hailed as a worthy experiment – Yankee fans would love to have someone else take ownership from the fruitless buying power of George Steinbrenner, and Yankee haters (a much larger audience) would be thrilled at that final pin-striped comeuppance.

RICHARD CAMPBELL
Manhattan

‘In the Fed’s Hands’

Although I am no defender of Alan Greenspan, the man who has stood watch over the most dramatic destruction of the dollar’s value in our monetary history, Lawrence Kudlow’s position against the Federal Reserve’s increase in interest rates appears to be misguided [“In the Fed’s Hands,” Opinion, May 12, 2005]. It fails to consider that, in the aftermath of the bursting of the greatest bubble in U.S. stock market history in early 2000, the Federal Reserve pulled out all the stops in order to avoid a Japan-style deflation. This included a dropping of short-term interest rates to historic lows and creation of a flood of liquidity, which, nevertheless, have failed to boost stock prices to new highs. The reason for this is that stocks, selling at roughly 20 times current earnings, are still far from cheap. In fact, they are expensive. As any investor knows, such price-to-earnings multiples typifies market tops, not bottoms.

While they have failed to propel the stock market to new highs, however, the Fed’s interest rate manipulations and excess liquidity have spawned new bubbles in commodities and real estate. Mr. Kudlow correctly points out that real estate pricing is geographical, but I doubt that any fair-minded person would deny the mania that has developed in this area. Household debt (mortgages included) is high, and savings are nonexistent. And, if he really believes that the tax benefits, as opposed to record low mortgage rates, easy credit, and excess liquidity, are responsible for this bubble, then how does he explain the sharp increase in investor activity in real estate? Only homes used as primary residences get the gain exclusion, not investment properties. Mr. Kudlow is correct that it is not the Fed’s job to correct the real estate bubble, but where was Mr. Kudlow when the Fed lowered rates and created liquidity to stave off deflation following the last (stock market) bubble? Had Mr. Greenspan not interfered, and had the market been left to run its course, perhaps the correction would already be over. It isn’t, in my opinion. Rather, the Fed is playing a dangerous balancing game trying to fight inflation with its upward bias in interest rates while M-3, the broadcast measure of money supply, is increasing.

There’s no tug of war between bulls and bears going on in the stock market, Mr. Kudlow. The battle is between unduly high valuations on the one hand and the forces of liquidity on the other, which so far have held off the inevitable, namely a continuation of the process by which share prices correct in a final purge of the excesses that brought about the bubble in the first place. The market will ultimately control, and even the Fed will not be able to stop it. Further delay via a lowering of rates, as advocated by Mr. Kudlow, is not the answer.

RICHARD H. BLISS
Manhattan

‘Pile of Junk’

There have been a number of stories that attribute the bulky, twisted Freedom Tower design to Daniel Libeskind [“Trump Calls Freedom Tower ‘Pile of Junk,’ ” New York Desk, May 13, 2005]. Those elements, as well as the windmills on top, were not designed by Daniel Libeskind. His contribution, in addition to the overall master plan for the site, related to the tower’s height at 1,776 feet and its iconic spire. This information is simply intended to clarify the record for the future.

AMANDA DAHLQUIST
Public Relations
Studio Daniel Libeskind
Manhattan

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