Alan Greenspan became Chairman of the Federal Reserve just two months before the 1987 stock market crash.
That was a rocky start, but in time his status grew. Eventually he was lauded as a bull market hero.
His term as chairman lasted through 2006, nearly 19 years; for most of that period stocks were in a rip-roaring bull market.
EWI's Robert Prechter had that bull market in mind when he wrote this:
"The stock market itself provided the biggest heroes...Alan Greenspan has been called a genius; if we were a monarchy, we’d have knighted him by now."
Prechter's Perspective
Greenspan's hero status lingered even after he stepped down from the Fed. Just days before the Dow's all-time peak in 2007, he graced the September 24 Newsweek cover.
But while bull markets create heroes, market downturns have the opposite effect. Prechter notes:
"Public heroes are of their times, and their images become vulnerable when the wind changes."
The Wave Principle of Human Social Behavior, p. 308
And boy did the winds change from 2007 to 2009 -- the stock market fell sharply and the "Great Recession" took over. That "wind change" amounted to a cold blast on Greenspan's image.
"Everyone is Laughing at Alan Greenspan" is the title of an article which appeared in the Atlantic Wire, one day after Greenspan wrote an essay for the Financial Times.The former Fed chairman criticized recent financial regulations and extolled the virtues of a free market; yet Greenspan's essay included a phrase that many commentators latched onto (and laughed about), namely: "with notably rare exceptions (2008, for example)."
The phrase has now become the focus of ridicule.
"Floyd Norris at The New York Times jokes that it's like 'a defense lawyer arguing that while his client may have committed a few murders on one particular day, his conduct on all the other days of his life had been exemplary.'"
Others chimed in: "'With notably rare exceptions, Russian Roulette is a fun, safe game for all the family to play'" and "'With notably rare exceptions, Germany remained largely at peace with its neighbors during the 20th century.' 'With notably rare exceptions, Mrs. Lincoln enjoyed the play.'"
The question is: Will today's laughter turn into tomorrow's anger?
We believe that the "wind changes" now underway are a shift from a positive to a negative social mood. In turn, the financial heroes of the bull market era will eventually be viewed much more harshly -- including many people who currently sit atop prominent financial perches.
True, a renewed optimism has been associated with the market rally since March 2009, but our analysis shows that this optimism is temporary.