We teach what we cannot learn.

A "friendly experiencer" in the markets, makes his decisions amidst the deluge of sights, soundbits, and combating opinions from other experiencers market-wide. Often times our convictions are proved wrong, and when we get burned, we learn not to touch the fire. But if we're all future-blind, how are we to know the incendiary agent? We may prepare ourselves against fire, only to be scalded by a bursting steampipe. Worse, in our blindness, we may mistake the scald for a burn and learn nothing.

And so we often learn the wrong lessons, mistaking causality or blaming our own tactics. But the most malicious lesson, is the one we make when we have been burned so many times that our nerves have been seared off. We cease to be able to feel. In our numbness, we abdicate our responsibility to prepare for the next conflagration.

Today the stock market fell back 11 years in time, briefly touching a number near which Alan Greenspan gave his infamous "irrational exuberance" speech. In 1997, Greenspan was worried about the excessive valuations in the stock market. He decided to raise interest rates. The market fell 7% and then roared back. Greenspan writes, "It recouped all of its losses and gained 10 percent more, so that by mid-June, it was nearing 7,800. In effect, investors were teaching the Fed a lesson. Bob Rubin was right: you can't tell when a market is overvalued, and you can't fight market forces."

This was precisely the wrong lesson to learn. Lets review what Greenspan said in his infamous speech:

"As we move into the 21st century... one factor will continue to complicate [the] task of pinning down the notion of what constitutes a stable general price level... Where do we draw the line on what prices matter? Certainly prices of goods and services now being produced - our basic measure of inflation - matter. But what about futures prices? Or more importantly, prices of claims on future goods and services, like equities, real estate, or other earning assets? Is stability of these prices essential to the stability of the economy... How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions... and how do we factor that assessment into monetary policy?... We should not underestimate, or become complacent about, the complexity of the interactions of asset markets and the economy."

And so after Greenspan's puny stand against asset prices (he raised interest rates 0.25%) he threw his hands in the air and abdicated all responsibility for counter-cyclical tightening, with grave consequences for us and the stability of the world economy.

He will be remembered for illustrating what he could not perform.

And for teaching what he could not learn.