Alan Greenspan has been on the news circuit as of late in support of his new book: The Map and the Territory. We found some of the interviews quite telling, particularly one interview in which he discusses a revelation regarding risk. He states “Fear and Euphoria are dominant forces, and fear is many multiples the size of euphoria. Bubbles go up very slowly as euphoria builds. Then fear hits, and it comes down very sharply. When I started to look at that, I was sort of intellectually shocked”. Are you kidding me, he was shocked by the the severity of the damage caused by unsustainable, irrational behavior (hence the term bubble) suddenly coming undone. I do however agree with his assessment of future Central Bank behavior, when he states that the Fed’s balance sheet must curtailed as he comments ” Historically, there are no cases where central banks blow up their balance sheets or where countries print money which doesn’t hit (with higher inflation)”. I will not pass judgement on the book as I have not read it, but it would appear that the Maestro is coming to the realization (quite late we might add) that econometric modeling when applied to markets driven by human behavior is not effective. We would suggest however that the same tools used by the Greenspan Fed, still reside in the toolkit of the current all knowing Fed.