Mergers, but No Mania

Such low expectations could be responsible for the Dow Jones Transportation Average's sharp fall from its recent highs, down 2.4% Monday.

Ahead of existing- and new-home sales data this week, Greenspan was sanguine about the housing market's spillover into the rest of the economy, but highlighted the budget deficit as a "significant concern," and he warned of rabid risk appetite in the financial markets.

"Risk is no longer perceived as major risk, at least as it was in years past, and that I must say I find disturbing," said Greenspan, according to wire reports.

Short-Term Gain, Long-Term Pain?

Risk appetite comes from excess liquidity, and as Fed Vice Chairman Donald Kohn said last week, from complacency about low volatility in the markets. The risk appetite depresses risk premiums on typically high-yielding assets and puts large investors on the hunt for ever more yield, which has helped spur massive private equity investment. The deals promise an initial stock price boost, as shareholders of TXU, insurance broker Hub International (HBG Quote) and Stations Casino (STN Quote) experienced Monday.

TXU's shares rose 13.2% Monday, while competitors such as Reliant Energy(RRI Quote) rose 6.3%; the Dow Utility Average jumped 2.4% to a record close. Hub jumped 14.8%, and Stations rose 3.8% after agreeing to separate private equity deals.

But the longer-term implications of leveraged buyouts are not always pretty.