domingo, 16 de octubre de 2016

domingo, octubre 16, 2016

Greenspan’s Bond Warning Goes Unheeded


The maestro just ain’t what he used to be. Or is he?

Former Federal Reserve Chairman Alan Greenspan warned in a Bloomberg interview on Thursday that yields on the benchmark U.S. Treasury note could rise to 5%. That would mean a paper loss of about 25%, though he didn’t suggest it would occur overnight.

The yield promptly sank to a two-week low. How different it was 20 years ago, when Mr. Greenspan gave his famous “irrational exuberance” speech about technology stocks: The Nasdaq Composite fell 3.4% from its intraday high to the following session’s low.

After that, Mr. Greenspan’s warning was ignored, and the index soared another 280% in a little over three years before sinking nearly 80%. His bond warning may be right eventually, too, but this time it has been ignored from the start.

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