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Some people think of former Federal Reserve chairman Alan Greenspan as the Maestro, the man who killed inflation and delivered us the era of plenty we are now enjoying.
We prefer to think of him as the world's greatest unsung stand-up comedian.
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Old Greenspan loves a good joke, and it's his deadpan delivery that gets us. How can he stop himself from sniggering when he says that he fears a "massive contraction" in Chinese stocks? How can he suppress a theatrical wink when he says that there's a one-in-three chance of the US economy going into recession this year?
After all, he's the one who laid out the whole bunch of banana skins that he clearly believes the global economy is going to slip on any day now
Everything's a bubble, said arch-bear Jeremy Grantham recently. Everything is overpriced, from property to timber to artwork - it's just a matter of time before it all comes tumbling around our ears. Not everyone is quite as downbeat as that - you can read a recent, slightly less pessimistic riposte to Grantham's piece from our own Tim Price here (Can the bull market climb over this wall of worry?). Tim also advises on how to successfully invest in an uncertain world in his fortnightly Price Report service.
But we certainly wouldn't disagree with the idea that many many asset classes are well beyond their sell-off-by dates. There's UK commercial property, which we've discussed over the past couple of days, and which banks are still increasing their exposure to, despite numerous warnings that the best days are already gone; there's residential property in most countries; there's Chinas stock market, as Mr Greenspan and almost everyone else is warning these days - and these are just a few examples.
What strikes us as funny about Alan Greenspan's constant warnings of impending doom is that it was largely he who set up the global liquidity flood that has caused all this mis-pricing of assets in the first place, by slashing US interest rates every time a crisis loomed.
And now, as the world's most-listened-to private citizen, his constant stream of mischievous little comments seem designed to make sure that the punch line to his big economic joke hits his successor Ben Bernanke right between the eyes with maximum force.
We're not sure Mr Bernanke will see the funny side. But in any case, it's interesting to look at the effect Mr Greenspan's words had on the markets. As John Authers points out in the FT, A-shares in China, which can only be held by local investors, didn't react much, which is unsurprising, because most Chinese investors probably haven't heard of Alan Greenspan. The market fell by 0.7%, mainly due to further increasingly shrill warnings from the Chinese government that stocks are in a bubble.
But, says Authers, "B shares, designed to be held only by foreigners, sold off by 8%." And by the end of play yesterday, these shares were in fact down a full 18% on Tuesday's opening levels. "Mr Greenspan helped on a rout that had already started."
The last time we saw a significant wobble in the Chinese markets, it rippled around the world, causing a short-lived but scary sell-off earlier this year. The markets bounced back, but that doesn't mean they'll just ignore a Chinese sell-off in future.
David Fuller of Fullermoney believes that "the fallout from a major correction by China's stock market would have global implications." He reckons that the market is definitely in bubble territory, but that the rise has further to go, particularly as despite the claims of China's authorities, "I maintain that china will want bragging rights to one of the world's best performing stock markets in the run-up to their August 2008 showcase Olympics."
He has a good point we just wonder if even the Chinese lawmakers are powerful enough to help stocks defy gravity for that long.
Turning to the stock markets
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In London, the FTSE 100 closed near its intra-day low at 6,565 yesterday - a 51-point fall. Comments from former Fed Chairman Alan Greenspan warning of declining Chinese growth hit the mining sector, sending the likes of Lonmin and Vedanta Resources lower, and the afternoon slump on Wall Street also hit investor sentiment. For a full market report, see: London market close
Across the Channel, the Paris CAC-40 ended the day 71 points lower, at 6,048, and the Frankfurt DAX-30 closed 38 points lower, at 7,697.
On Wall Street, stronger-than-expected housing data prompted concerns that US interest rates would rise, ending a morning rally. The Dow Jones fell 84 points to end the day at 13,441, despite earlier triple-digit gains. The tech-heavy Nasdaq fell 35 points to 2,541. And the S&P 500 lost 12 points, ending the day at 1,509.
In Asia, concerns over slowing Chinese growth saw the Nikkei close 215 points lower, at 17,481. In Hong Kong, the Hang Seng fell 261 points to end the day at 20,538.
Crude oil futures were nearly 1% higher at $63.76 this morning, whilst Brent spot had climbed to $71.69 in London.
Having hit a low of $651.30 yesterday, spot gold had risen to $654.20 this morning.
Turning to currencies, the pound was at 1.9847 against the dollar and 1.4771 against the euro this morning, and the dollar was at 0.7440 against the euro and 121.29 against the Japanese yen.
And in London this morning, former EMI executive Jim Fifield confirmed that he is still interested in making an offer for the record label. The news comes after Corvus Capital, with whom he had been working on an approach, announced that it does not intend to bid. EMI - which boasts artists such as Coldplay and The Beatles - has already been subject to a £2.4bn bid from buyout firm Terra Firma earlier this week. The company's shares had jumped by as much as 5% in early trading.
And our two recommended articles for today...
The best way to profit from Asia's skyscraper boom - Right now, the world's second skyscraper boom is under way in the fast-growing economies of Asia. Seven in ten of the world's tallest building are already to be found in the region, and limited space means there are more on the way. So learn the lessons of the first boom and invest in the one key commodity that's set to soar in price. To find out what it is, click here: The best way to profit from Asia's skyscraper boom
How to bank profits abroad - The high street banks have been getting a lot of bad press in recent months, what with their miserly interest rates and extortionate overdraft fees. So you may be surprised to discover that banks are actually making most of their money outside the UK. To find out how you could profit from the trend, see this former cover story - now available to non-subscribers: How to bank profits abroad
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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