Greenspan Forecasts Recession (Market Expected to Rally)

Uh-oh: I read something today that all but pushed me into the Bullish camp, nearly cancelled my recession forecast, and almost made me revise my market prediction to Dow 16,000: Former Federal Reserve Chair Alan Greenspan
warned that the U.S. economy might slip into recession by
the end of the year.

While we can disagree as to how good a Fed Chair Easy Al was — he had a number of notable successes, i.e., LTCM and post Asian Contagion — IMO he was too much like a bartender whose answer to nearly any problem was to pour another one.

However, there is little disagreement that economic forecasting was not his forté. We have noted in the past numerous examples of his lack of forecasting acumen.

That said, here is his economic commentary from this  morn:

"Mr. Greenspan said the U.S. economy has been expanding
since 2001 and that there are signs the current economic cycle is
coming to an end. "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, 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," he said. "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."

Mr. Greenspan said that while it would be "very
precarious" to try to forecast that far into the future, he couldn’t
rule out the possibility of a recession late this year. He said he has
seen no economic spillover effects from the slowdown in the U.S.
housing market, and added that the global economy seems "benign and
stable."

"We are now well into the contraction period and so
far we have not had any major, significant spillover effects on the
American economy from the contraction in housing," Mr. Greenspan said.

U.S. housing starts are down "quite sharply," he said,
which is "implicitly creating a reduction in the very high inventories
of new unsold homes."

Its enough to make you want to buy SPX futures . . .

>

UPDATE: March 4, 2007, 9:42am

In today’s NYT, Dan Gross has a column about the forecasting record of the Maestro and other dismal scientists:

"Indeed. No disrespect to Mr. Greenspan, but neither he nor the similarly numerate members of his professional fraternity have a particularly good record of forecasting recessions. As Yoram K. Bauman, an economist who teaches at the University of Washington and performs stand-up comedy, summed up an often-used line: “Macroeconomists have successfully predicted nine of the last five recessions.”

-The Forecast for the Forecasters Is Dismal   
Dan Gross
NYT, March 4, 2007, 9:42am
http://www.nytimes.com/2007/03/04/business/yourmoney/04view.html

 

>

Source:
Greenspan Warns of Possible Recession
By SAI MAN
February 26, 2007 5:37 a.m.
http://online.wsj.com/article/SB117248024161519153.html

Category: Economy, Federal Reserve, Psychology

Traders’ Top 10 Mistakes

Category: Trading

Generic Wiki Linkfest

Category: Weblogs

Friday Night Jazz: The Making of Peg

Category: Digital Media, Friday Night Jazz, Music

Gold Knows

Category: Economy, Federal Reserve, Inflation

Short Selling Falls

Category: Investing, Markets, Psychology, Short Selling, Trading

San Diego / La Jolla

Category: Weblogs

Smackdown! Microsoft versus Google

Category: Consumer Spending, Corporate Management, Digital Media, Intellectual Property, Technology, Web/Tech

Margin Levels Hit New Record

Category: Data Analysis, Investing, Markets, Psychology

S&P500 in Yen and Euros

Category: Currency, Investing, Markets