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February 28, 1997
It was a tough week for the sevens, as Alan greenspan kicked the props out from under a 7,000 Dow and seven percent mortgages. Mortgages haven't moved all that far (yet), but the "zero and zero" 30-year stuff is all in the eights, now.
New Wall Street slang: the "tape bomb."
In the old days, stock prices arrived in brokers' offices by ticker tape. Today, the scrolling blue and white lines across the bottom of CNBC and CNN are known as "the tape," as are the news lines scrolling accross the bottom of traders' Kantor Fitzgerald dealer-to-dealer screens.
When big news arrives, markets move, instantly. No time to escape or re-position: if you're on the wrong side at the moment a bomb comes scrolling down the tape, you're dead. No last cigarette, no blindfold, no time even to beg for mercy.
FLASH!
GREENSPAN SAYS PRE-EMPTIVE TIGHTENING APPROPRIATEŠ.
Boom. You've been tape bombed.
There was nothing murky about the chairman's words.
"Risk premiums for advancing funds to businesses in virtually all markets have declined to near-record lows."
[Money is too cheap. I can fix that.]
"Is it possible that there is something fundamentally new about this current period that would warrant such complacency? Yes, it is possible."
[Not bloody likely. Give them one last chanceŠ]
"But, regrettably, history is strewn with visions of such "new eras" that, in the end, have proven to be a mirage."
[Strewn with empty wallets, too. Last chance. Do they get it?]
The chairman warned of "irrational exhuberance" last fall, in a careful, rhetorical question. In January, he referred to the stock market as "breathtaking." Now this.
The chairman is in the position of the parent who has warned, warned, and then issued the "or else." The markets gave up a little ground this week, but in no way behaved as though they heard or understood the warning and its consequences.
The unruly hard head finally says, "Oh, yeah? What are you going to do about it?"
Unless we are saved by weak payroll numbers next week, the chairman seems exceedingly likely to toss a .25% tightening move into the markets, just to see how exuberant the speculation has gotten.
In the military, it's
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