There are varying opinions of former Fed Chairman Alan Greenspan. Greenspan is the former Chairman of the Federal Reserve and a world renowned economist who served as chairman of the Fed from 1987 to 2006. He’s noted for many accomplishments over his illustrious career including helping to prevent the 1987 stock-market crash from becoming far worse, but after a strong economic period in the 90’s came the mortgage crisis and Greenspan’s detractors blame his hatred of financial regulation as a big reason for it.
Most notably, however Greenspan is remembered for his phrase: “irrational exuberance” which he coined in 1996 during a speech in which he warned about inflated, over-blown asset prices in the equities market, specifically in technology stocks. Those comments came right before the dot-com bubble. When the dot-com bubble exploded in the early 2000’s many technology companies collapsed and disappeared. The combined market values of 280 stocks fell by nearly $2 trillion dollars when the dot-com bubble burst. That’s why Greenspan’s most recent comments about the bond bubble about to break because of “abnormally low” interest rates have gotten so much attention by investors.
Greenspan’s bold warning came during a recent interview on CNBC’s “Squawk Box.” He said:
• “The bond market is on the verge of a collapse that also will threaten stock prices. The prolonged period of low interest rates is about to end and, with it, a bull market in fixed income that has lasted more than three decades.”
Watch and listen to more of former Fed Chairman Alan Greenspan’s warning (re: the bond market) on CNBC’s Squawk Box, below.
During the interview with CNBC Greenspan did not take shots at current Fed Chair Janet Yellen or any of the Fed’s monetary policies, but he did say that he believed:
• “Low interest rates cannot stick around forever, and once rates start shooting up again, the consequences will be severe, and that the downturn will be quick and will take the market by surprise.”
CNBC analyst Art Cashin of UBS, who’s a veteran of Wall Street’s trading floor, found Greenspan’s comments compelling. Watch below.