Summers Says Bubble Concern in U.S. Technology Shows Rebound in Confidence
Former U.S. Treasury Secretary Lawrence Summers said rising concern that technology stocks are in a bubble shows how sentiment has rebounded since the 2007- 2009 American mortgage and credit collapse.
“Who could have imagined that the concern with respect to any American financial asset, just two years after the crisis, would be a bubble?” Summers, who is now a professor at Harvard University, said at a conference today in Shanghai. “Yet that concern is increasingly raised with respect to American technology, with respect to certain other American assets. That is a reflection of the resumption of confidence.”
LinkedIn Corp., the largest professional-networking website, more than doubled yesterday after its initial public offering, an echo of some of hottest stocks in the dot-com boom. Yahoo! Inc. rose 154 percent when it first traded in 1996. Elsewhere, U.S. farmland prices may be in a bubble, Federal Reserve Bank of Kansas City President Thomas Hoenig said earlier this year.
“Today there are very substantial risks, to be sure, but the economy is growing, unemployment is falling and financial conditions are normalized,” said Summers, who was director of the White House National Economic Council in the Obama administration from 2009 to 2010.
Summers said the “central irony” of a financial crisis is that it’s caused by too much confidence, borrowing and lending, and is resolved by more confidence, borrowing and spending. He was Treasury chief from 1999 to 2001 under President Bill Clinton, a term that coincided with the collapse of technology shares. The Nasdaq Composite Index (CCMP) slid 39 percent in 2000.
LinkedIn today held most of its gains after climbing 109 percent yesterday. The shares climbed as much as 14 percent before a late retreat left them down 1.2 percent for the day at $93.09 on the New York Stock Exchange.
To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net
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