Tuesday, February 27, 2007

Greenspan talks, the market walks

Greg Ip has an article discussing the recent Greenspan speech where he said a US Recession in 2007 was "possible."

Mr. Greenspan told an audience via satellite early Monday, Hong Kong time, that a U.S. recession was possible. "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," he said, according to Dow Jones Newswires. "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."
Mr. Greenspan didn't say a recession was likely; indeed, he noted that most forecasters think it unlikely. He called the global environment "benign" and said there has been no "major spillover" from the contraction in housing activity. His comments appeared more aimed at questioning the conviction of many investors that because each of the last two expansions each lasted a decade, this one will, too.

The fact that Greenspan did not say a recession was likely is a major point. Many traders were passing around headlines that did in fact say Greenspan thinks 07 recession likely. Nevertheless, it is interesting that Greenspan still has this much influence on the markets, even though he retired over a year ago.

No comments: