Whatever your opinion of Alan Greenspan's stint as Chairman of the Federal Reserve, you have to give him credit for his semantic creativity. His "irrational exuberance" comment will live in infamy, and ever since this spring, everything has become a "conundrum." Yet he is quite a bit more eloquent than these comical examples would suggest. Greenspan has a way of transforming mundane cliches into flowing phrases that obfuscate the simplicity of the situation.
A new gen emerged from the economic symposium in Jackson Hole, Wyoming today. Greenspan uttered these words:
"History has not dealt kindly with the aftermath of protracted periods of low risk premiums."
In other words, bubbles pop. So is he hinting that the housing market may be experiencing more than just "froth"? Perhaps so. He also hinted that asset price gains "can readily disappear" (umm, crash) once confidence in the gains is lost.
His words mean that the Fed will likely continue attacking the dangers posed by the housing bubble. Many of us spectators believe, though, that the damage is already done. Even if Greenspan & Co. were successful in getting the housing market were to cool gradually, they cannot deflate the debt bubble that has been created in its wake.
Housing stocks and their stepchildren, consumer stocks, were down modestly today. The market movements did not betray anything special today, although I got a technical sell signal on Western Digital. The signal was the first of any kind for WDC since nearly a year ago. In that span, the stock has doubled, so I have been watching like a hawk to time a short.
Disclosure: Short WDC