Ode To Greenspan
I’m just a gigolo
and everywhere I go
people know the part I’m playin’
paid for every dance…selling each romance
ooohhh, what are they sayin’
but there will come a day,
when youth will pass away
what will they say about me?
when the end comes they’ll know,
I was just a gigolo
life goes on without me…
–-Just a Gigolo by
Louis Prima
Â
Everywhere you look today, you will find some journalist attempting to
decipher and put their own spin on Greenspan’s testimony.
As someone who chooses to take the road less traveled, I will present a
succinct summary of Greenspan’s key comments with the aid of an old friend…the Magic 8-Ball.
Without further ado, let’s proceed.
Q: Mr. Greenspan, do you consider the U.S. economy to be headed into a
recessionary period?
Magic Greenspan 8-Ball: “Cannot predict
now.”
Q: Mr. Greenspan, do you believe that the current pace of technological
innovations will continue to benefit productivity gains and fuel further
equity appreciation?
Magic Greenspan 8-Ball: “Outlook good.”
Q: Mr. Chairman, how do you feel about the consumer saving less and less
while their debt load has increased to record levels?
Magic Greenspan 8-Ball: “Better not tell you now.”
Q: Chairman Greenspan, do you believe the proposed tax cut in its current
form would stimulate the economy?
Magic Greenspan 8-Ball: “My sources say ‘Yes.'”
Q: Mr. Chairman, should we be concerned about the credit quality issues that
currently exist?
Magic Greenspan 8-Ball: “Try again
later.”
Q: Mr. Greenspan, would it be prudent to expect an intra-quarter rate cut as
well as an additional 50-basis-point cut in March?
Magic Greenspan 8-Ball: “Not a
chance.”
So there you have it. “Greenspeak” totally simplified.
It is clear that Greenspan is trying to keep the market bubble inflated as
long as possible as the Fed continues pouring money into the economy. There
are obviously two Greenspans with two completely different modi operandi.
Richard Gere, move over. Alan Greenspan is the ultimate American gigolo.
With the bond market now beginning to take back its
“guarantee” of a 50-basis-point cut in March and Greenspan virtually eliminating the pipe dreams of
another intra-quarter cut, the equities markets began to wonder what vehicle
could be used to conjure up more optimism. With the promise of endless rate
cuts diminishing and the “second-half recovery” beginning to finally reveal
itself for the hoax that it is, we need to petition for the bullish advisors
and analysts on television to be connected to a polygraph machine the next
time they show their shameless faces.
The Humphrey-Hawkins testimony has historically produced sustained multi-week
follow through in the financial markets. As of the close today, it is clear
that the equities markets did not respond favorably to what they heard.
With the Dow Jones Industrial Average failing to take out the magic 11,000
level on its fifth attempt in the past week, we may now see the Dow bulls
pull in their horns and take profits on the silliness they have propagated
for the past eight months. “Old economy” and retailing stocks trading at 70
price/earnings ratios are certainly something to be proud of for the “old
boys” on the NYSE floor.
Funny how our favorite tech names were bashed relentlessly for being
overpriced when they sported similar PE ratios, yet stocks like Kohl’s
Department Stores
(
KSS |
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PowerRating) and Shaw Group
(
SGR |
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PowerRating) have rallied between 500% and
1000% in the past few years and have PE’s of 7x their respective peer
groups. Greed is alive and well, my friends. It just has been re-focused in
areas that we don’t usually pay attention to.
At this period in time, I continue to build my short positions in the
retailers and apparel sector, as well as in the DIA’s and other basic material
stocks that have rallied excessively and are displaying topping action.
Long Watch: Nothing.
Short Watch:
(
IBM |
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PowerRating),
(
QCOM |
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PowerRating),
(
GMST |
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PowerRating),
(
GE |
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PowerRating), retailers and apparel, banks, and basic
materials. There are too many of these to list.
Do your research and consider monthly and weekly charts as well. Too many
traders just focus on daily charts without referring to larger time frames to
clean up a lot of the noise.
Random Musings: CNBC, please don’t give the Napster trial the same coverage
as the Microsoft verdict. Yesterday, you would think the future of the free
world hinged on the court decision. If I can’t download “The Humpty Dance”
from Napster, I’ll spring $11 for the darn CD. It is not going to affect
the future of my computing. Take a chill pill.