Barron's: The Cloning of Alan Greenspan.
February 19, 2001
Up and Down Wall Street
A Greenspan in Reserve
By ALAN ABELSON
Cloning seems to be in the news again and, in particular, human cloning.
There's a predictable cycle in the-next-big-thing news stories. After the initial
wave, there's a lull that gives way after some interval to a freshet of follow-ups.
And cloning is adhering nicely to the script.
The sudden rekindling of media interest in cloning may be sparked in large
measure by the burst of publicity about the human genome. In part, too, its origin
can be found in epidemic journalism: When one rag or boob-tube outlet comes up
with a story, the competition is immediately infected by an incurable impulse to,
well, clone the story.
That great medical journal, Time, for example, devoted its February 10 cover to
human cloning. Its elaborate takeout came hard on the heels of a cover piece in
the New York Times Sunday magazine on the same subject and which, indeed,
featured some of the same people.
The heading on the Time cover was "Human Cloning Is Closer Than You Think."
We've got news for Time: It's here!
That stunning epiphany was inspired not by our third martini at lunch or the
chance discovery of some secret lab tucked away in a hidden corner of Tennessee
where twitchy, guitar-strumming researchers have been busily contriving to turn a
lock of Elvis's hair into a living, breathing replica of the great man. Rather, it hit
us like a bolt of lightning while perusing Alan Greenspan's testimony rendered to
a gaggle of senators last Tuesday.
Alan Greenspan has been cloned!
No kidding. The evidence that there are two Greenspans is overwhelming.
Greenspan the Original, as we all know, viewed the enormous surge in capital
investment quite benignly. Indeed, more than that, he hailed it with unconcealed
enthusiasm as the agency of the productivity miracle, which we could only infer
was providentially bestowed on this nation as reward for its impeccable
monetary policy.
In last week's discourse with the senators, however, Greenspan the Clone
declared authoritatively, as if it were as plain as the nose on your face, that
growth in capital spending by consumer-durable and business-equipment makers
had reached unsustainable rates, and that while "high-tech demand was doubling
and tripling annually...new supply was coming on even faster." None of the
assembled solons had the wit to say to him, "So, now you tell us?"
Three weeks ago, Greenspan the Original reported that the economy had
ground to a halt. But Greenspan the Clone last week said, not to worry, the
economy's recovering (how could it not be after such timely action by the
Federal Reserve?).
Greenspan the Original viewed the budget surplus as sacrosanct, a treasure to be
zealously husbanded and used only to get this proud land free of the yoke of debt.
Greenspan the Clone, in sharp contrast, moans that the surplus poses an awesome
problem: What do we do with the money when there's no more debt to pay off?
Ever since he posed the irksome question, frankly, we haven't been able to catch
a wink of sleep.
Although identical physically and in demeanor and expression, and alike
afflicted by a certain myopia (the Original couldn't see a bubble, the Clone can't
see a recession), the two Mr. Gs, as all the foregoing suggests, can be wildly
divergent in their perceptions and reactions. Obviously, the guys in the white
coats didn't get the cloning quite right. No knock on them, really, the technique's
still in the development stage.
The cloning of Mr. Greenspan was a huge, hush-hush national-security rush job
comparable to the Manhattan Project that produced the first atom bomb. Its secret
code name was Operation Punch Bowl.
The cloning idea was conceived in that golden era when Mr. Greenspan enjoyed
universal reverence and acclaim, and fear arose among the powers-that-were that
some evil terrorist or crazed day-trader might take him hostage and create
economic turmoil. The recent public appearances of the Clone are a kind of
tryout. We'd say, given the odd tenor and content of his utterances, he ought to be
sent back to the shop for some fine tuning.
As Jim Grant wonderfully remarks, after noting Mr. Greenspan's cheery reference
in his Congressional testimony to a survey of more than a thousand security
analysts showing their three-to-five-year projections for profits to be quite high,
"When the Federal Reserve is optimistic because brokerage employees are
bullish, there must be trouble."
Instead of conjuring up hope from the bleatings of analysts, the chairman would
be better advised to study the little graphic that adorns this page. It's the
handiwork of Ed Hyman's IGI Group and depicts the melancholy rise in new
claims for unemployment insurance.
interactive.wsj.com
As Ed points out, the last time that lugubrious total reached these levels was back
in 1990, at the start of a recession. And given the gathering tsunami of layoff
announcements, which further swells with every passing day, the trend seems to
have nowhere to go but up.
Jobs and profits are the meat and potatoes of the economy. They're the stuff that
makes or breaks confidence of consumers and business, respectively, and both
are on the skids (consumer sentiment in February, the latest reading shows, is
taking another header). And whatever the three-to-five-year outlook, the
three-to-five-month prospects are definitely bleak for employment and earnings.
Nor are the bright housing numbers for January -- starts up 5.3%, permits up
12.6% -- necessarily a harbinger of better times ahead. The eagerness of
homebuilders to build, whetted by lower mortgage rates, will prove greater, we
suspect, than the willingness of consumers to buy.
Mounting layoffs, after all, are not the ideal backdrop for housing. As our friends
at Bridgewater Associates point out, the latest figures on both mortgage
applications and consumer plans to buy a house are decidely unencouraging.
On this score, as someone pointed out at lunch last week, an awful lot of
undoubtedly fine people have wantonly leveraged the equity in their houses and
used the cash, often as not, to maintain a standard of living neither their income
nor Nasdaq has been supportive of lately. To these bloodshot eyes, that also
holds some potential to mess up the neatly sanguine calculations on housing.
The other significant economic news on Friday -- we're ignoring the PPI stuff
because one-month's data don't tell you much except what happened in that one
month -- was further notice that the smokestacks aren't smoking with their
old-time gusto. Capacity utilization continued its sorry decline, dropping to
80.2%, the lowest since August of '92, when industry was just beginning to shake
off the recession that did the President's daddy in.
As someone once said, if it smells like a recession, looks a recession and
acts like a recession... ....
That mention of W.'s daddy was prompted by a spasm of nostalgia, touched off by
the news that the air sirens were sounding again in Baghdad, courtesy of the U.S.
Armed Forces. It took us back to those thrilling days of Desert Storm. It wasn't
immediately clear on Friday who had ordered the bombing of Iraq. Our colleague
Randy Forysth, an expert on international affairs, suggests it might have been
Steve Case, Commander-in-Chief of AOL, anxious to get the ratings up on his
new addition, CNN. Strengthening that surmise is that the current Secretary of
State was a fellow director of Mr. Case at AOL. Confirmation has not been
forthcoming, however, as we go to press.
The stock market seemed too preoccupied with bad earnings to worry about
sending Saddam a belated Valentine's Day greeting, which shows how mature and
rational the market has become. Next thing you know, the market will yawn and
go soberly about its business every time an analyst announces a change in his
rating on a stock from "buy hysterically" to "accumulate with great abandon," or a
company forecasts a 50% drop in quarterly earnings and gleefully reports only a
49.5% drop.
Every time this market starts to get a little frisky, darned if reality doesn't intrude.
Last week was no exception: A nifty little revival in the techs was snuffed out
brutally by a barrage of just terrible news and warnings on profits.
Hewlett-Packard, Dell and Nortel were merely a few of the more prominent
cases in point.
We feel obliged to note that some of the more technically minded observers who
have been bearish lo! these many years recently have turned bullish, citing the
stretch of better breadth, the preponderance of new highs over new lows, the old
saws about not fighting the Fed or the tape and a host of more arcane indicators.
We wish them well, but we suspect their conversion will prove more than a little
premature.
It's not at all clear, for one thing, that priming the pump like mad and slashing
interest rates will quite do the trick against a downturn that's rooted in huge
overcapacity brought on by a reckless capital-spending boom and a vastly
overleveraged economy. None of us has been witness to the strange and more
than a little unnerving sight of the Fed pushing on a string, but stick around and
keep your eyes open.
As for the technical signs that lead these seers to the bullish path, we won't
quarrel; they certainly know more about such things than we do. But we don't
think all the indicators in the world are as important as the simple fact that we've
had a market that has battened on at least five years of unbelievable, almost
unimaginable excess, an excess it's going to take more than nine months and a
partial wipeout of Nasdaq to get rid of.
What's happened so far, we'd call a start.
And, besides, what kind of a bear market would it be if it didn't devour some of
its own. |
