WSJ/Dow Jones has out a partial transcript of Alan Greenspan’s comments last weekend that some argue helped set in motion this week’s sell-off:
Greenspan was asked if he shares the reported opinion of George Soros that the U.S. will have a hard landing and a recession in 2007, or if that is too pessimistic.
Greenspan: Well, when you’ve been through a cycle of expansion as we have since, really 2001, the recovery is, as what people like to say, long at the tooth, and that when you get this far away from a recession, invariably, forces build up for the next recession. And indeed we are beginning to see signs of, for example in the United States, profit margins, after extraordinary upward-side moves, have begun to stabilize. Which is an early sign that we are in the later stages of a cycle.
But I think, having said that, the probabilities of forecasting a recession are probably more in the area of a third than they are more than a half. And while yes, it is possible that we could get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed they are projecting forward into 2008 at a reasonably good level with some slowdown. Is George Soros correct? I frankly don’t know. I do know that it is very precarious to try to forecast that far in the future. And I mean six months, eight months in the future is a very long forecast. So I’m not concerned as he apparently is, but I can’t obviously rule out the possibility.
It’s typical opaque Greenspan-ese, so here is the shorter version, courtesy of MS Word’s auto-summarize feature:
Well, when you’ve been through a cycle of expansion as we have since, really 2001, the recovery is, as what people like to say, long at the tooth, and that when you get this far away from a recession, invariably, forces build up for the next recession.
Sounds bearish to me, Al. Hey, maybe traders can read after all.