YES, MR. GREENSPAN, SIR

By Daniel Kadlec

O.K., write this down and post it on the refrigerator: the next time Alan Greenspan says "duck," I will duck. And I will be plain tickled that he didn't say "quack," because if he had, I'd jump in a puddle and do that too. Greenspan is the powerful chairman of the Federal Reserve, the nation's central bank, but until recently he was looking like the Rodney Dangerfield of the bull market. Three times in three months he implored investors to rethink their love affair with stocks, starting with his "irrational exuberance" speech in December. Yet stock prices danced defiantly higher atop torrents of cash flowing into mutual funds.

Now Greenspan is getting more respect than an IRS auditor. But you have to wonder why it took an interest-rate jolt and what is developing into the worst stock-market plunge in seven years for his misgivings to register. This is a horrible replay of 1994. You may not remember, but don't feel bad because nobody was listening then when Greenspan expressed similar concerns and, surprise, jacked interest rates higher. The market tanked, pronto. Greenspan doesn't control the markets, for sure. But his is the hand closest to the interest-rate lever, which gives him an awful lot of influence. "He took the gun out and laid it on the table," says John Manley, an analyst at Smith Barney. "He must think we're thick as bricks."

Well, now even that density has been penetrated. The Dow Jones industrial average fell a pulse-quickening 608 points (8.6%) at its low, after peaking at 7085 on March 11. And that doesn't come close to describing the anguish out there. Technology stocks are in a full-fledged bear market. They peaked last summer, and a whole batch of them are down 60% or more, including such one-time darlings as Intuit and Iomega. Merrill Lynch reports that 47% of all stocks selling over $5 have fallen at least 20%. The worst is over, you think? That's way too optimistic for me. Manley studied the past five bear markets, defined as a drop of at least 20% in the Standard & Poor's 500. In each case, the day the S&P started downward, the average stock (Smith Barney monitors 4,500 of them) had already fallen 19%. About like today. Look at popular stock funds like PBHG Growth and Twentieth Century Vista, down nearly 20% in the first quarter. When the guy buying stocks on his credit card gets this news, he'll start selling.

If you're running for cover, consider Treasury bonds, now yielding more than 7%, or T-bond funds. "That's an extraordinary giveaway with inflation below 2%," says Charles Clough, chief strategist at Merrill Lynch. Commercial real estate investment trusts (REITS), with their 6%-plus yields and healthy underpinnings of rising rents and still reasonable property values, are a good option. So are foreign stock markets, including that of battered Japan, which has to turn up at some point. You could, of course, simply ride this thing out. But prices remain grossly inflated by most yardsticks. At best we are entering a long period of sub-10% annual average stock gains--as, ahem, Mr. Greenspan has been suggesting.

Daniel Kadlec is TIME's Wall Street columnist. Reach him at kadlec@time.com