Wednesday, May 21, 2008
According to this report from Bloomberg, former Federal Reserve Chairman Alan Greenspan was able to not only identify a bubble in real time but predict its demise with sufficient accuracy to assist new employer Pimco in profiting handsomely.
Chief investment officer Bill Gross noted that the company made "billions" of dollars from his advice.
Interestingly, this stands in stark contrast to the repeated claim while Fed chairman that it is impossible to detect bubbles until after they have popped.
During a 30-minute discussion on banks several months before the global credit crisis, Greenspan's "brilliance in terms of forecasting the potential for exactly what happened was a big money saver for us," Gross said yesterday at a conference organized by the Asia Society in Los Angeles. "He's made and saved billions of dollars for Pimco already."Another of the Maestro's major clients in his new consulting business is John Paulson of Paulson & Co., a hedge fund that made billions betting against the subprime mortgage market not long ago (see this WSJ story for details).
When do they start writing the history books for the current period?