I thought the same thing. Somebody with poo hands must have created that title based on his quote. The headline was drastic - the quote was innocuous.
Here's his quote: ""When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign," Greenspan said via satellite link to a business conference in Hong Kong. "For example in the U.S., profit margins ... have begun to stabilize, which is an early sign we are in the later stages of a cycle." "While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown," he said. Greenspan said that while it would be "very precarious" to try to forecast that far into the future, he could not rule out the possibility of a recession late this year." Pretty bearish statement, IMO. He's insinuating a recession is possible in 07, and increasingly possible in 08.
The thing is last time Greenspan warned big "irrational exuberance" he had to say it several times, and tighten repeatedly before the market responded. In classic fashion we had a blow-off top in tech followed by a punishing multi-year bear. This time I think we are going to see a dampened effect because there is memory of 1999-2003.
hes jawboning the bond market higher with lower rates to protect the housing industry from readjustments in the ARM's that use the 10 year note as a benchmark.
a huge drop in bond yields would funnel money into equities, and create a new wealth effect that paulson regretted stating in public to the media.
This is interesting if PE rises to 28 with continued earning growth the effect can be very significant. Can it happen with or without rate cuts? Iâve been bullish equities quite some time but now Iâm starting to doubt. Gold, oil and bonds rising in lockstep, kind of worrisome. Just excess amount of cash floating around, or are investors hedging against something ugly?
Just have your stops or stop limit orders in place, and pray that any selloff isn't so bad that liquidity in the markets isn't an issue for sellers.
oil revenue from inflated oil is filling the bank accounts of some large multinational corporations and oil producing nations bank accts. Those profits are being converted into hard assets or assets that have some security in them. so the dollars are fueling some of the bond markets movements higher. But also the fundamental aspect of the trade that the FED has increased rates numerous times now and the inevitability of a looming recession secondary to housing blowing up. also as liquidity increases, as more paper circulates, it garners less and less, and M3 is at record levels. So most everything your seeing is measured in terms of dollars. So Gold and other commodities stated in dollar terms will move up. thats why the stock market is trending higher also, the price of oil is signaling strength in world economies. So if you do see Oil start dropping below a psychological threshold like 50 dollars per barrel then it may indicate to others that the demand is not great enough to preserve speculative levels. there will come a time similar to 2000 when the rubber band gets stretched and fundamental sense or rationale is thrown out the window, that a reversion to mean scenario will occur. The huge deficits can only be financed with cheaper dollars. So dollar will trend lower in non exporting countries pairs. If dollar continue to trend lower it fuels further hedging by bond holders that are dollar based to hedge the implied future loss. Its a vicious cycle. The fed cannot afford to see a deteriorating bond market. It will break the system. It will break housing. It will break the stock market. It will break the dollar. So mixed signals will be sent out, and recession fears will keep the bond market supported. As yields drop lower and lower, money will not tolerate the low yields and will look for equity placement. And it will fuel a stock market rally, and also the liquidity levels globally underpin the stock markets. The only thing that loses value in this scenario are paper assets, everything else moves up.
<i>"Maybe if Greenspan had included the term "poo hands" in more of his speeches, they would have been easier for some to comprehend..."</i> If Greenspan had used more English language in his speeches, that would have been a good start. I scored 100% on my english regents exam and perfect score in english segment of SAT exam. What'd that get me? Hopelessly lost trying to follow along with any of Greenspan's speeches. He purposely strung together words not found in any dictionary I own. Why the great lengths to be so obscure? Did he work that hard to enlighten us all, or confuse the s(tuff) out of us instead? Greenspan showed his true colors many times... three of them being surprise interest-rate cuts in the morning sessions while stock markets traded. Why was that? Purposely blow out shorts and do the PPT's work for them? He chaired three different decisions that devastated more than a few trading careers. For what? Purposeful attempts to manipulate our free market enterprise? For what? To shock an economy upward at the expense of individuals and firms it would obviously shatter? Financial markets are a two-way street. Longs have no greater right to exist than shorts do. The decisions to knowingly crush one important part of a marketplace for the "greater good" of the economy shows how stupid he was. The fact that surprise cuts were totally erased <b>the very next day</b> by further selling to same or lower lows the last two times he chaired those decisions speak for effectiveness of such. Accomplished zero good, caused a great deal of unnecessary harm. FWIW... I was long SPX put options Jan 2001, but long SPX call options April 2001 when those two surprise-cut events were dropped.