The Somewhat Shorter Alan Greenspan

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.

Related posts:

  1. Alan Greenspan: How I Spent My Bubble Bursting Days, Part II
  2. Alan Greenspan: How I Spent My Bubble Bursting Days
  3. Instant Alan (Greenspan)
  4. Parsing Alan Greenspan
  5. Dinner with Alan Greenspan

Comments

  1. John K says:

    Luckily, the fact that it sounds bearish to you is actually bullish.

  2. Cheap shot, John. Beneath you.
    My point here was merely that Greenspan post-Tuesday denied he meant his comments to be bearish — despite the markets clearly taking them that way. So, given Al’s usual opacity, I thought it would be fun to parse them.

  3. Greg Linden says:

    The auto-summarized version simply is the first sentence from the original version, is it not?

  4. Yup. Turn out that you only need Al’s topic sentences :-)

  5. Andi says:

    If he had uttered “irrational exuberance” in 1999 instead of three years earlier his bear claws might be a bit sharper…
    The market was just looking for an excuse to shake out the weak players, Greenspan’s remark was grasped from the rear view mirror by people who don’t understand pull-backs. We need more blood on the floor, and it’s not Greenspan’s call.

  6. John K says:

    I didn’t mean it as a cheap shot – sorry about that.
    I was trying to imply that a bull market needs punditry and pronouncements from on high that create worry.
    Here’s some interesting factoids from this week that no one seemed to comment on:
    * Q4 home prices were revised upwards from having been down to an increase of 1.1%, and a total increase of 5.9% for 2006. (Office of Federal Housing Oversight)
    * New home inventory declined to 536,000 from 573k peak in July 2006
    * Shanghai market is up 36% YTD even after 9% decline this week.