Corporate Prophet

Who is that guy?

Alan Greenspan doesn't speak very often. And when he does, he talks in l-o-n-g, dull, monotones that would turn playtime to nap time at Mrs. Miller's Funtime Kindergarten.

Mr. Greenspan could put the entire audience to sleep in the middle of "Armageddon" just by whispering, "Please pass the popcorn."

And no one knows what he's saying. He shows up before Congress, as he did last week, and talks for hours, but he leaves legions of experts trying to figure the precise nature of a message couched in language that makes the tax code seem a model of clarity.

But he moves markets.

More than anyone in the world, short of a world leader with a big army and an itchy trigger finger.

Greenspan is, of course, the chairman of the Federal Reserve Board, the body that determines interest-rate direction for the largest, most influential economy in the known universe.

And last week, he did it again. He gave Congress two days of testimony that unleashed a minor Armageddon on Wall Street. He took a Dow Jones Industrial Average that was resting after reaching a series of record highs and sent it on a downward route - almost 400 points last week.

Which is why Guy Halverson's story, to the right, is so important.

Guy writes about the importance of owning a very specific kind of stock.

Wall Street calls them high-quality, big-cap, growth companies, which means companies that everyone knows - which are big and strong and will report growing profits year in, year out. As Guy notes, these are the obvious companies: the likes of General Electric, Coca-Cola, Microsoft, Ford, IBM, and Dell Computer.

Wall Street likes to call them franchise stocks, companies so good at what they do that they virtually own their market. Competitors trail way back.

Dell dominates personal computers; Coke has bottled up the beverage market, especially overseas; General Electric may be the best-run company in the world.

They are so dominant that it takes a recession to inflict severe damage to their business and stock-price outlook.

And it takes more than some comments by Greenspan.

What he said, last week, that spooked Wall Street so much - short-hand version - was: more problems headed this way from Asia; inflation still a worry, so the Fed is unlikely to cut interest rates soon.

And since economists have been leaning toward expectations of a rate cut, Wall Street leaned hard on stock prices.

Greenspan essentially delivered a double whammy. He indicated that demand for workers is so strong that wages may grow too fast. And then he suggested (remember - this man's picture follows "vague" in the dictionary) that the antidote for such inflationary pressure would be a slower economy or higher rates.

Either possibility means a pinch for business profitability. And since profits and stock prices hold hands, slower profits bring lower stock prices.

All this from a man who probably requests "something with a slight hint of moderately strong spice, but not so overpowering as to dampen the appetite and surrounding dairy-product nuances, presented in the flat-round mode and of a non-vegetarian nature" when he orders pepperoni on his cheese pizza.

Over the long term, the franchise companies can shrug off these whipsaw movements - just so long as the overall direction of the market is upward, as it has been for the past 16 years.