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2HRS2GO: Who cares what Greenspan says?

Why do people expect so much from the person in charge of the Fed?

Have an opinion on this?

Federal Reserve Chairman Alan Greenspan gets portrayed as the guardian of the American economy. Maybe he sees himself that way. But keep a few things in mind:

He's not here to maintain torrid growth rates.

He's not here to make shareholders happy.

He's not here to make you rich or ensure your portfolio never loses value.

Most people understand that, but it doesn't stop the market from moving every time Greenspan speaks publicly. It doesn't stop people from criticizing Greenspan's forecasting ability, or lack thereof.

The Fed oversees banks, handles payments for the U.S. government, keeps the financial system stable and guides U.S. monetary policy toward "maximum employment, stable prices and moderate long-term interest rates," according to a Fed brochure.

That's it.

By the criteria outlined for his job, Greenspan has been superb. The government still pays its bills, inflation hasn't gone anywhere, unemployment sits at unheard-of lows, and the last time I checked, most banks remain healthy as memories of the S&L crisis fade.

So why do people complain about Greenspan? For that matter, why does the market devote so much attention to everything he says? "Uh oh, he said 'risks still seem to be weighted on the side of building inflation pressures.' Must be time to sell!"


Suppose the Fed does the expected and raises the overnight lending rate another quarter point at its next meeting. That means nothing for the technology traders and investors reading this.

A quarter point hike won't stop anyone from buying software from Microsoft (Nasdaq: MSFT), installing PCs and servers from Dell (Nasdaq: DELL) and IBM (NYSE: IBM), picking up Cisco Systems (Nasdaq: CSCO) routers and expanding networks with JDS Uniphase (Nasdaq: JDSU) optical signal boosters. People will still flock to the Internet. New devices will keep coming.

Stock markets aren't making much of today's comments. After the Dow Jones Industrial Average plunged initially on Humphrey-Hawkins jitters, it rebounded and sits at plus-25 for the day as this is being typed. The Nasdaq Composite Index is up 2.7 percent. The S&P 500, the broadest indicator among the major indices, has also gone higher.

No jitters today, probably because a lot of nervousness was already expressed during the market's slide over the last few sessions. It also helps that Greenspan, as usual, didn't say much.

But you never know when the market will tremble before an innocuous phrase like "irrational exuberance". Never mind that most people already knew the stock market isn't rational and hasn't been rational for a long time -- when Greenspan says so, it somehow means more.

Not really, but the market sees it that way.

Sensible investors ignore Greenspan and focus on company specifics instead. Microsoft can't do anything about interest rates, but a Windows 2000 flop would present a real worry for MSFT shareholders.

But it makes for less interesting headlines, I guess.

Speaking of specific companies...

  • Imaging Technologies
  • (Nasdaq: ITEC) This company's shares are rising today as one of the most active Nasdaq issues following the company's announcement of new plans for the and sites.

    ITEC makes printers, printer controllers and printing software, but the stock has been a popular trading vehicle for the last few months mostly on buzz about the websites. Now people are getting excited about a strategy change that would shift from a catalog for inventory that no one wanted to a site for selling printer consumables. will switch from an information website to a retailer of graphic arts software, starting with ITEC's own products. The site "could expand its offerings" to include programs from other companies.

    You willingly choose your risks with penny stocks like this one, so don't let this doubting writer discourage you. But Wall Street's penchant for second chances never fails to amaze me. 22GO>