Mr. Market had a few things to think about this week, and in an odd turn of events, some of them had nothing to do with Enron, Andersen, or related accounting fears. Sure, Andersen pleaded not guilty to obstruction of justice charges (and succeeded in getting a quick trial date, May 6), but we expected that. Meanwhile, the many Andersen partners and employees who had nothing to do with Enron but are nonetheless in danger of losing their jobs if the accounting firm collapses have become the scandal’s newest class of victims; Jesse Jackson has “surfaced as a defender of Andersen’s beleaguered staff,” says the Chicago Tribune. Here’s what else happened.
Two-faced Greenspan? Just as expected as Andersen’s plea was the decision by the Federal Reserve’s Open Market Committee to leave interest rates unchanged but to suggest that the next rate move will be an increase. Big snooze, if you ask me, but it freaked out Mr. Market a bit. Meanwhile, I was interested to read a Greenspan slam by William Greider in the March 25 issue of The Nation. (The article’s not online as I write this, or I’d link to it.) Greider, author of the very fine Secrets of the Temple, has taken a look at the recently released 1996 FOMC transcripts. Greenspan has been fingered by some for having failed to head off the stock market meltdown by waiting too long to start jacking up rates; John Cassidy makes that case in the recent book Dot.Con. This is actually not a compelling argument—fiddling with interest rates means battering the whole economy just for the sake of managing the markets, which is not a great idea. Cassidy also raises, less loudly, the more convincing point that Greenspan could at least have tightened margin requirements, and that’s the focus of Greider’s piece. I’ve always wondered why Greenspan resisted this measure. Greider quotes from January 2000 congressional testimony in which Greenspan asserted that “the level of stock prices have nothing to do with margin requirements.” That may be defensible (I haven’t seen the studies that Greenspan cited), but on the other hand, a public tightening of those requirements could well have sent a strong signal that the Fed was concerned about speculation, and at the very least you could counter that the Fed’s refusal to do it amounted to a de facto blessing of dangerously high share prices. What Greider finds in the transcripts is that one of the people who bought some version of that argument back in 1996 was … Alan Greenspan! Referring to stricter margin requirements, he told his FOMC colleagues, “I guarantee you that if you want to get rid of the bubble, whatever it is, that will do it.” He was worried that it might have other unspecified negative consequences. In any case, Greider accuses Greenspan of “flagrant duplicity,” and he has a point.
Hewlett won’t pack it in: Carly Fiorina claimed victory in the big shareholder showdown, and renegade board member Walter Hewlett said he wanted to wait for all the votes before he conceded—but you knew that.
Last call: NBC has decided it won’t run hard-liquor ads after all. Even so, the likes of Smirnoff and Bacardi will continue to get air time for their brands by way of malt beverage spinoffs like the one discussed in this earlier Ad Report Card.
The Halliburton shuffle: The energy firm, still hounded by potential asbestos liabilities addressed in an earlier column, has announced a plan to split itself into two subsidiaries: The Energy Services Group would be separate from a building and construction unit. This, the company’s CEO explained, would make it easier for investors to understand Halliburton. There was, of course, speculation that this meant the latter group would be spun off altogether. The asbestos claims originated in that segment of the company, so perhaps its name, as a stand-alone firm, could be something like: The Asbestos Liability Target Group. Again, so that it will be easy for investors to understand.
Kmart and Nico: Several people responded to Monday’s Ad Report Card, in which recent Kmart advertising was looked upon with skepticism, by pointing out that the background music I had dismissed as “generic” was in fact the song “These Days,” from the Nico album Chelsea Girl. At least one person called this a “landmark” record, but many others noted that the song is also on the Royal Tenenbaums soundtrack, which I assume is where many of my friendly correspondents heard it. Does this make Kmart’s ads edgier than I gave them credit for? Oh, you decide.
Seriously, though: When is the last time you watched Wall Street Week With Louis Rukeyser? His Web site says he is “America’s most popular economic commentator—and much more: its best-loved and most-respected adviser on the entire political-economic-financial scene.” Sounds more like a description of Moneybox to me! Anyway, reports indicate that Rukeyser is about to be given the boot, replaced by two co-hosts. On the plus side, looks like the next Louis Rukeyser Investment Cruise is in August.
Puzzler: A newspaper ad for A&E’s Biography series has the tag line, “You’re either Biography or you’re not.” What does that mean?
Oscar picks:Titanic wins everything, except Best Director, which goes to Russell Crowe.
Playlist: “Fantazias De Samba,” by Los Hombres Calientes, from New Congo Square. “Spacemoth,” by Stereolab, from Sound-Dust. Just about anything by the fabulous Eleni Mandell. Catch her live if you can; tell them Moneybox sent you, and get a look of puzzled indifference, free.