S&P Slips Into Greenspan Gulch

"Alan Greenspan is not Nostradamus. Or maybe he is because Nostradamus was often wrong, too," Aaron Task, Editor-at-Large of TheStreet.com, says on Wednesday's "The Real Story" podcast. "Greenspan is human, which means he's fallible."

In addition to his famous "irrational exuberance" comment in 1996, the former Fed chairman was wrong about adjustable-rate mortgages in 2004 and natural gas prices in 2003, Task says. More recently, he has been forecasting rising probability of a recession in the U.S., even as economic growth appears to be rebounding.

Despite that unenviable track record, comments by Greenspan that China's stock market is "clearly unsustainable" were widely attributed as causing an afternoon selloff in U.S. stocks Wednesday. Major averages were higher earlier in the day amid another round of M&A activity, including:

• Alcan (AL) urging shareholders to reject the $27 billion hostile offer from Alcoa (AA) and rumors it may be in talks with BHP Billiton (BHP);
• Crescent Real Estate Equities (CEI) reaching an agreement to be bought by a unit of Morgan Stanley (MS) in a $6.5 billion arrangement, including debt;
• Payless ShoeSource (PSS) acquiring Stride Rite (SRR) for roughly $800 million, or $20.50 a share.

The M&A activity is definitely a positive, and Task notes other issues also may have contributed to the afternoon slide -- including technical-related selling as the S&P 500 touches its March 2007 high, rising Treasury yields and heightened geopolitical tensions in the Middle East.

Task's first guest Wednesday was David Peltier, with the weekly "Should You Buy It?" segment, which featured insights on ConocoPhillips (COP), Adobe Systems (ADBE), and Goldman Sachs (GS) vs. Morgan Stanley (MS).

Task's second guest, TheStreet.com Senior Writer Vishesh Kumar came on to discuss the ongoing surge in shares of Amazon.com (AMZN), as well as the latest developments in the Microsoft (MSFT)-Yahoo! (YHOO) mating game.