Janet Yellen Nails it

From an earlier post by Biiwii.com guest Doug Noland:

Senator Dean Heller: "A quick question about quantitative easing: Do you see it causing an equity bubble in today’s stock market?"

Yellen: "I mean, stock prices have risen pretty robustly. But I think that if you look at traditional valuation measures, the kind of things that we monitor, akin to price-equity ratios, you would not see stock prices in territory that suggests bubble-like conditions. When we look at a measure of what’s called the equity risk premium, which is the differential between the expected return on stocks and safe assets like bonds, that premium is not – is somewhat elevated historically, which again suggests valuations that are not in bubble territory."

Thank you Ms. Yellen for testifying to my point.  Equities are not in a bubble by "traditional valuation measures", just as I have been saying.  If you are sincerely and actively bearish the market you had better be bearish because you either think monetary policy is about to fail (i.e. its efficacy is going to wane) or that policy makers are going to be forced to cease and desist, most likely by the Treasury bond market.


Yes folks, here is that chart once again (courtesy of SlopeCharts) telling its story of a broad US stock market rising in line with one of its "traditional valuation measures", general corporate profits (green line).  Right there in parabolic accompaniment of stock prices and corporate profits is Janet Yellen herself, as represented by the black line, which is money supply growth courtesy of the Fed's ongoing ZIRP and QE operations.


She tells the truth.  Stocks are in line with traditional valuation measures; and also with non-traditional policy measures.  This week in NFTRH 265 we introduced another view into this dynamic…


Excerpted from NFTRH 265′s closing (Wrap Up) segment:

"Federal debt was used throughout the meat of the 20-year secular bull market as Alan Greenspan feasted upon the wellspring of monetary goodwill that was left by his predecessor Paul Volcker's inflation fighting policy (as interest rates approached the high teens).

Federal debt was then ramped down after it had done its job in instigating a bubble in stocks (S&P 500's Hump #1).  As we have documented in other graphs, Hump #2 was instigated by the bubble in commercial credit that was promoted by official policy on the Fed Funds rate.

Now we have Hump #3.  This one is rising in real time with a 'hockey stick' of debt accumulation by the Federal Government as well as the Federal Reserve.  The racket will end.  So if people want to view NFTRH as a fundamentally bearish newsletter, so be it.  NFTRH is bullish on honesty and bearish on dishonesty on the biggest picture.

The stock market is honestly rising as far as credit accumulation, money printing and willful policy will take it.  Right now, that appears to be pretty far.  But I simply ask that people remain aware of the mechanics beneath the surface of the mania."

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10 thoughts on “Janet Yellen Nails it

  1. Yellen is a career academician and politician who is not in touch with economic realities. How can she explain market valuations given to TSLA, NFLX, AMZN, etc., etc??? The United States needs leadership from Federal Reserve Members like Esther George who is not afraid to speak out when the COMPANY policies just do not make any sense.

  2. with the tornadoes blowing thru the Midwest and middle states, there will be no prisoners to continue the reconstruction of obamacre-less-ness. loss of power,continuity, and brains. butt lev it to the democrap-4-brans to use prisons in the obama states. so if u cqan not register, u wil pay the fine,git mor taxes leved on your return?! twat return?! u r not imployed? am sorrie, i forgot we are in a DEPRESSION! N not a recesion?!

  3. If you believe all the basic stats coming from government sources, sure, we are in a recovery with little or no inflation, with steady increases in jobs, housing values, etc. etc.

    Only thing is, the stats are essentially propaganda used to disguise the dismal state of affairs and to justify endless hyperinflationary measures used to keep bond prices high, interest rates low, the big banks solvent, and most importantly, to prop up the US dollar, to keep it as the global reserve currency. But it is an unsustainable system, if for no other reason than most of the rest of the world is sick of US criminal manipulation of markets and currency, and they do not wish to continue to conduct their trade in US dollars, nor to hold large dollar reserves.

    At some point, we will no longer be able to just print dollars to pay our bills. The dollar will crash in the exchange markets, and thus the cost of all the imported goods we depend upon will skyrocket, since we will have to exchange our paper for their paper.

    Garbage in, Garbage out, that is what these stats are telling you.

  4. yeah, and she ought to know, huh?

    a socialist academic that has never worked in the private sector.

    she could not nail something with a hammer.

    February 15, 2006, Fed Chairman Bernanke said: "The housing market has been very strong for the past few years . . . . It seems to be the case, there are some straws in the wind, that housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise, but not at the pace that they had been rising. So we expect the housing market to cool, but not to change very sharply.

    case closed.

  5. Quite an accommodative rationalization of unprecedented economic artifice, jeremy.

    Does being 'aware of the mechanics beneath the surface of the mania' enable investors any real prospect of successful exit from this 'honestly rising', admittedly manic market? Note that never in the history of trade has there been technological control of valuation by dominant players within nano seconds in off-market hours. Note as well absolutely required ZIRP and endless off-loading of market-less paper simply to maintain sleight-of-hand balance sheets and a positive market trajectory. And, while we're at it, note the law of diminishing returns clearly at work.

    There's no historic example that I'm aware of that suggests that ANY mania ends well. Period. Especially as the day of reckoning inevitably nears. This 'market' is a death-trap for those still with capital.

    Get out now!

    1. A death trap for those with equities or paper money (fiat money, unbacked money, see Weimar Germany for how that ends). Time to think of things that you can drop on your foot--barrels of oil, bars of gold or silver, lumber, food crops, etc.

      1. Don't forget bars of soap too...those would potentially see a higher valuation and could become fiat currency. GEEEZ

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