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George Zachar

3/11/2005
Fed Chairman Alan GreenSwan, by George Zachar

In the opening sentence of his latest MacroEconomics 101 lecture, the Fed Chair hints that even he has been expecting the appearance of a dreaded Black Swan:

"The U.S. economy appears to have been pressing a number of historic limits in recent years without experiencing the types of financial disruption that almost surely would have arisen in decades past."

He then waxes poetic (for him, anyway) about how globalization and de-regulation have altered the economic playing field, allowing for the current prosperity/capital flow situation.

One disturbing passage directly addressed the vaunted housing bubble:

"...a destabilizing contraction in nationwide house prices does not seem the most probable outcome....nominal house prices in the aggregate have rarely fallen and certainly not by very much. And even should more-than-average price weakness occur, the increase in home equity as a consequence of the recent sharp rise in prices should buffer the vast majority of homeowners."

 We now have a textbook entry for the phrase "self-referential moral hazard."

George Zachar is principal of Greensward Capital, a money management and trading firm in New York. He focuses on U.S. and European debt futures and options thereon.  "I try to integrate market directional and volatility trades, with "living to fight another day" my central guiding philosophy," Zachar says. "When I was a child, I remember watching a cheesy spy movie, where one spook says to his opposite number, "The object of the game is to stay in the game."