Post-Fed Greenspan
It seems like former Fed Chief Alan Greenspan just won’t go away. Even more, it seems influence over the markets has increased since leaving office.
Just last week he was in on a teleconference and dropped it on his listeners in Madrid that the markets in China were due for a “dramatic contraction”. Pretty strong words given that the economy in China is going great guns and to the uninitiated to the cyclical nature of economics, would sound rather bearish.
But who is Greenspan to make predictions on world markets? He isn’t even the Fed Chief any more!
Oh contraire. Within minutes of his comments hitting the cyber-waves, the Dow Jones gave up a modest gain for the day and ended up turning a 30 point loss, only to recover to finish the day down over 14 points. How’s that for influence from the confines of retirement?
If you ever had the chance to tune into one of Greenspan’s speeches via Bloomberg or CNBC, you’ll confide that the experience was short lived. Primarily because you’d doze off by the time he’d hit any high notes in the delivery.
Monotoned, flat and boring, Greenspan never seemed to induce much excitement in his talking points, and given the bland nature of the topics, I can’t much blame him, and the stock market didn’t lend credence to his opinions, probably because no one was awake to decipher the information.
But now something’s different. Wall Street is listening to Greenspan like he’s the economic God that never was during his 16 year stint as the top man of money.
It seems as though that now he’s off his podium, he can say what ever he wants to with little regard for how it may play out in the stock market. He’s turned himself into the speaker that never was.
So what’s with Greenspan? He’s bearish on China, he called the housing decline in the States before anyone could fathom such a thing could happen, and what’s more, The Street is listening.
The man may be more powerful, unscripted, than anyone gave him credit for…
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I’m generally little concerned with what the Street wants to do on day to day basis. It just likes to react, most of the time it doesn’t really care all that much in what direction as long it moves someone makes money. People will trade on Greenspan just because people think people will trade on Greenspan – self fufilling prophecy. In the end it should only matter to traders and not investors.
Perhaps you’re right, dong. But I think it is left to quantify what you call an “investor”.
Much like the Street, economists such as Greenspan AND Bernanke react to the economic events of the world. Additionally, by virtue of the role they play in the economy, they don’t care which direction the markets turn so long as they restrain inflation and curb recession.
Back to my original point. You are only an “investor” until you sell your “investment”, at which point you could be called a “trader”.
If you take the pure economic insight from what Greenspan says, it would make sense to sell most equities at the peak economic opportunity, and buy recession neutral entities.
So while you may not “trade” on Greenspan’s comments, at some point you WILL trade on basis of someone’s comments, or some other market force that tells you it’s a good idea to sell your “investment”.
Thanks for chiming in!
What indicator, technical or otherwise would get you to sell a seemingly healthy stock?
Greenspan gets the same info you and I get now. Everything he says now is his own opinion. Granted his opinion probably carry’s more weight than most, it is still an opinion. I also think it’s interesting that he has a Bloomberg machine stationed in his office….let your mind run wild on that one….
Perhaps more than an opinion. More the voice of reason?