Greenspan Has a Faulty View of the Landing

Second, we've been down this "it's different this time" path with the Fed chairman before. Sometime after his more famous remarks about the irrational exuberance of the stock market, Greenspan became an apologist for higher valuations by citing the extraordinary productivity gains in the U.S. economy in the late 1990s. Historical measures of danger weren't valid for the then-current situation because the U.S. economy was growing so much faster than it had in other periods. Frankly, having bought into the first "it's different this time" argument to my pain and chagrin, I'm reluctant to buy into this new version.

The rate of capital-markets globalization remains vague. And while we know there must be some point at which foreigners will stop putting money into U.S. dollar-denominated investments, home bias or no, we have no idea when that might occur.

I've also paid attention to Greenspan's recent characterization of the problems of using productivity growth as a guide to policy. If you change "productivity" to "financial globalization," they're a warning to anyone who wants to use the newest version of "it's different this time" financial globalization to guide policy in the current global economy. "Productivity is notoriously difficult to predict. ... We have scant ability to infer the pace at which such (productivity) gains will pay out and, therefore, their implications for the growth of productivity over the longer run."

A bet that globalization of the financial markets will give the capital markets time to engineer a soft landing is a bet on faith in the powers of omniscience of the Fed. That may be good enough for Congress, these days, but it doesn't hold much appeal to me.

My money is on Buffett. He's not asking me to believe it will be different this time. Again. And he has actually put $21.4 billion of his company's money in foreign exchange contracts that will pay off only if the dollar declines.

Changes to Jubak's Picks

Sell The St. Joe Co. I think it's time to take some profits in St. Joe(JOE Quote). For Jubak's Picks, which operates on a sell-none-or-sell-all basis, it means selling this entire position. The stock has had a huge run-up and has looked weak recently on fears that long interest rates will finally start to kick up. Under those circumstances, I think investors would be wise to trim positions. In my case, this means selling it all. I have a 117% gain since I added the shares to Jubak's Picks on Oct. 3, 2003. (Full disclosure: I will sell my shares of St. Joe on March 18.)

Sell Penn Virginia. I think we're near a short-term top in energy prices -- much of the recent move in the price of the commodity seems linked to unusually cold/snowy weather in the East -- so I'm going to take my profits in Penn Virginia(PVA Quote) here. The shares are near the top of their recent price channel and are ahead of themselves in the short term. The sale also frees up some cash for a buy if the current overall stock market weakness continues through the end of the month, as I expect. I have a 14% gain on these shares since I added them to Jubak's Picks on Dec. 14, 2004. (Full disclosure: I will sell my shares of Penn Virginia March 18.)