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. Continue reading "Janet Yellen Nails it"