The Greenspan Effect: Words That Move the World's Markets [Hardcover]

Jeffrey L. Cruikshank (Author), David B. Sicilia (Author)

Book Description

Publication Date: September 23, 1999

The United States Federal Reserve System has played a key role in U.S. economic affairs since it was established in 1913. Still, it has never enjoyed the unprecedented power and influence it wields today over global financial markets.

The reason? Alan Greenspan. Greenspan first gained attention when he stopped the 1987 market crash in its tracks, propelling the U.S. economy into its longest period of uninterrupted growth in history. But it was in a speech the evening of December 5, 1996, when Greenspan's words truly revealed their unprecedented powers. When his seemingly innocuous comment about the sky-high stock markets--"How do we know when irrational exuberance has unduly escalated asset values?"--hit global wires, world markets immediately plunged as much as five percent. The next morning, with Greenspan's warning on every New York trader's lips, the Dow immediately dropped two percent. To reeling traders, the dollar value of understanding Greenspan--and the instantaneous effect his speeches would have on markets--became clear.

THE GREENSPAN EFFECT recalls these and other Greenspan episodes in the most honest, dependable words available--Greenspan's own. Excerpts of his speeches from 1987 to the present are followed by expert analyses of those speeches, and nuts-and-bolts reporting on global financial reactions. This up-close examination of Alan Greenspan's tumultuous regime discusses his early career, and how he developed the bottom-up analytical approach that is today his hallmark at the Fed. It shows how, unlike the politicians who appoint him, Greenspan has never allowed political distractions or personal foibles to interrupt his chosen course. By focusing on AlanGreenspan's public pronouncements as Fed chairman, THE GREENSPAN EFFECT provides a concise, accurate distillation of Greenspan's thinking on today's most important economic topics. It presents an historic, solidly researched overview of how these pronouncements have affected Wall Street and other world financial markets. In so doing, this immensely valuable profile equips investors and businesspeople with today's most important tool--an analysis of how Alan Greenspan has responded in past economic environments, what he is likely to do in the future, and how financial markets will react.

Editorial Reviews

Amazon.com Review

The son of a stockbroker and himself a one-time swing-band musician, Federal Reserve chairman Alan Greenspan has incontrovertibly turned his formerly anonymous presidential appointment into the single most dominant financial position on earth. Whenever he prepares to speak, fiscal agents around the world hold their collective breaths--and then react emphatically to his words, often even before he finishes saying them.

But exactly what does he say that so affects money management? And precisely why does he say it? David Sicilia and Jeffrey Cruikshank, consultants and previous collaborators, do a formidable job of answering both questions by analyzing the chairman's own statements in The Greenspan Effect. The result is an insightful point-by-point assessment of the man and his enormous influence. From critical utterances like those in his famous "irrational exuberance" speech (which sank the markets after he delivered it in 1996) to uplifting phrases such as "oasis of prosperity" (which boosted them when he used it in 1998), they're all examined according to the way they affect and are affected by interest rates, inflation, labor, banking, global economies, and other factors. Perhaps most useful is the penultimate chapter, which offers 16 principles of Greenspanology, such as "It's always about interest rates" even though he "hardly ever talks about interest rates," designed to guide those who "navigate the often troubled waters onto which Greenspan pours his rhetorical oils, or into which he introduces new turbulence." --Howard Rothman

From Library Journal

The words of Federal Reserve Board chairman Alan Greenspan are said to have the power to move markets. Sicilia, a business historian, and Cruikshank, a communications consultant, set out to prove that theory through examination of movements of the Dow Jones Industrial Average (DJIA) in the days surrounding several of Greenspan's speeches. And, indeed, they discover a "Greenspan Effect": Greenspan's words significantly changed market valuations for several daysAbut the DJIA tended to return to its trend after that time. The bulk of the book consists of short excerpts from Greenspan's speeches, organized by topic, with brief passages of explanation; the authors also provide a biographical sketch of Greenspan and a brief history of central banking in the United States. Of particular interest are Chapter 29, explaining Greenspan's opposition to federal budget deficits, and Chapter 37, providing 16 tips to keep in mind when interpreting Greenspan's speeches. Recommended for both public and academic libraries.AA.J. Sobczak, Covina, CA
Copyright 1999 Reed Business Information, Inc.

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Product Details

• Hardcover: 273 pages
• Publisher: McGraw-Hill Companies (September 23, 1999)
• Language: English
• ISBN-10: 0071349197
• ISBN-13: 978-0071349192
• Product Dimensions: 9.1 x 6 x 1.1 inches
• Shipping Weight: 1.2 pounds
• Average Customer Review: 2.7 out of 5 stars  See all reviews (7 customer reviews)
• Amazon Best Sellers Rank: #3,878,703 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

21 of 23 people found the following review helpful:

2.0 out of 5 stars Reinforcing a problem, November 17, 2000

By 

taking a rest - See all my reviews
(HALL OF FAME REVIEWER)   

This review is from: The Greenspan Effect: Words That Move the World's Markets (Hardcover)

One of the problems that our next President does not want to face is the resignation, or the removal from the Federal Reserve Chairmanship by Mr. Greenspan. As I write we still have no President, thankfully we do have Mr. Greenspan.

For those readers who follow or invest in the markets, you all are acutely aware of the power this man wields, 2 words can literally have an impact on markets measured in the hundreds of billions of dollars. Who will forget "irrational exuberance"? Those words were not even a declaration, but part of a rhetorical comment, and terror still ensued.

Contrary to what often is reported, Mr. Greenspan speaks English. However the word parse has become connected with any statement he makes. So the routine is, Mr. Greenspan speaks, and I truly believe the vast majority understand him, but like any event the press and their "experts" take apart every word, whether his brow is wrinkled, and essentially try to graph each appearance and comment to find the "true meaning". I have always found this annoying and condescending. People who are sophisticated enough to manage their money, can manage to understand our Fed Chairman.

I made it through this book, but I would not recommend you bother. There is a new book about the man I am reading, and so far it is excellent. This work reinforces the idea that experts need to break down every word, and then explain what Mr. Greenspan means. There are no great insights offered, nothing is simplified, you will learn virtually nothing about the workings of The Federal Reserve, and if you feel comfortable listening to the Chairman now, this book will only make you question whether you should.

If you are looking for the opinions of these Authors, if you want to follow a needlessly complex maze of an attempt to find a pattern to everything the man has said, this is for you. As I said, Mr. Greenspan speaks English, and were it not for the emphasis placed on pairings of words out of context, and the emotions they generate, people would understand we have a brilliant Fed Chairman, who at times chooses to be vague, and at times cannot give definitive answers about the future, who can.

He has been a remarkable Chairman, appointed and reappointed by 3 presidents from both parties. Now you can take that statement at face value, or have the talking heads dissect it for you. The answer is the same either way, and the time you save listening to what you hear, and skipping the experts, is time better spent on anything else.

10 of 10 people found the following review helpful:

4.0 out of 5 stars Amusing and Interesting, October 22, 1999

By 

Letemendia Mariano (Buenos Aires, Argentina) - See all my reviews
(REAL NAME)   

This review is from: The Greenspan Effect: Words That Move the World's Markets (Hardcover)

Speculating on market expectations? Certainly! Speculators and Investors alike are trying to estimate, as they did in the past, the discount factor that markets are applying to his latest speech. Good companion to Beckner's "Back from the Brink: The Greenspan Years" hence write the same I did for that book. We always watch the yield curve and try to unsuccesfully predict how changes in its slope might affect market expectations. Knowing about the person who indirectly draws it makes a lot of sense. Undoubtly, Alan Greenspan will be remembered for many years to come as one of the greatest economic minds of this century. Highly recommended. Easy read.

7 of 8 people found the following review helpful:

2.0 out of 5 stars Not as good as the Man, February 19, 2000

By 

David Maloney (Chicago) - See all my reviews

This review is from: The Greenspan Effect: Words That Move the World's Markets (Hardcover)

King Alan is my favorite man in Washington. I know I am not alone here. But this book was not what I had hoped it would be. There are a lot of quotes and brief comments on each. Most of the book is about regulations and banking, not on the markets. In a couple of months the market information will be outdated. There is some interesting insite into the 1998 crisis, but that only covers a few pages. The juicy quotes are pretty far between. I did not learn too much about Greenspan or his effect here.