By DAVID MOON, Moon Capital
February 29, 2004
Federal Reserve Board Chairman, Alan Greenspan, spoke to the Credit Union
National Association last week. I didn't think he looked so good. He
looked a lot older than the other soon-to-be 78-year-olds I know, but I guess he
gets a bit worn carrying around the weight of the entire world economy on his
shoulders. (Greenspan's birthday is this week, if you want to send a
card.) Television can do that to you, making you look worse than you do in
real life. I used to be on television once a week and I firmly believe the
camera makes you appear 80 or 100 pounds heavier than you actually are.
That's my story and I'm sticking to it.
As usual, Greenspan's comments made news headlines. But I was
disappointed in the comments most papers featured. Greenspan discussed a
recent Federal Reserve Board report showing that many homeowners could have
saved tens of thousands of dollars during the last decade if their mortgage
rates had been adjustable rather than fixed.
I hope no one spent a great deal of time preparing this report.
Consumers would obviously save money if their mortgages carried adjustable
rates - at least during a period of generally declining interest rates.
That's what we've had over the last ten years: generally declining mortgage
rates. This report is the equivalent of discovering that investors would
have made more money investing in stocks, as long as they only did so when stock
prices were increasing. It's not brain surgery and I usually expect a bit
more from Alan.
Speaking of expecting a bit more from someone, I have a confession.
Last week, I made a reference to the performance of the stock market during
1932, the last year of the Calvin Coolidge administration. The only
problem is that Herbert Hoover was president in 1932. I appreciate all of
the readers who were quick and kind enough to detect the error.
Other readers were a bit more vicious in their comments last week. One
gent from Crossville wrote that my column was so full of misleading statements
it qualifies me to be Secretary of Offense. (Watch out Randy Sanders.) As proof,
he offered that I completely ignored that 60 percent of our national debt was
accumulated during the administrations of three republican presidents.
Although I haven't verified the claim, it is irrelevant to my conclusion.
During the 14 years of Reagan, Bush and Bush, the average annual S&P 500
return was 10.69 percent - almost exactly in line with the historic return of
the index, irrespective of presidential party affiliation. Presidents have
an awful lot of power, but not on Wall Street ' not in the long-term, anyway.
The same reader argued that the US has gone to hell since Bush 43 took office
on January 20, 2001. After watching a young man give his umbrella to
a stranger - a very pregnant woman - during a rainstorm Wednesday morning, I
disagree with that assertion, as well.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).