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Janet Yellen is Taking Away the Punchbowl… For Now

Phoenix Capital Research's picture




 

Many commentators witnessed the first Q&A session with Janet Yellen as a disaster.

 

We don’t see it that way at all.

 

Yellen is widely believed to be a super dove at the Fed. This is largely due to her being a firm advocate for QE in the past few years.

 

However, Yellen is at least intelligent enough to know when the markets are out of control (something neither Bernanke nor Greenspan could do). To whit, Yellen publicly stated that housing was in a bubble in 2005. At the time she suggested deflating it (but was concerned about the deflation being too intense).

 

So, regardless of her various flaws as a forecaster and economist, Yellen has shown herself capable of: 

 

1)   Identify bubbles.

2)   Calling for action for rein them in.

 

With that in mind, Yellen’s decision to continue tapering QE indicates that she is aware of the fact the markets are getting out of control again or are approaching a bubble.

 

This is further confirmed this by her decision to drop the 6.5% unemployment threshold as well as her suggestion that interest rate hikes could come as soon as six months after QE ends this coming December.

 

In simple terms, Yellen is alerting Wall Street that she will not be the second coming of Bernanke (at least for now) and that she is going to be removing the punchbowl.

 

The markets typically take a while to register this. The fact that last week was a quadruple witching options expiration helped hold things together. But now that options expiration is over, we’re running out of reasons for the markets to hold up.

 

Moreover, we’ve recently seen a number of high profile investors (Icahn, Grantham) warn that the markets are overvalued and primed for a sharp drop.

 

Thus we find the following:

 

1)   Yellen is moving to rein in the markets.

2)   Investment legends are warning of a potential drop in asset prices.

3)   Corporate profits falling.

 

This environment is ripe for a market pullback. Smart investors should take this opportunity to prepare for it.

 

For a FREE Special Report on how to protect your portfolio from a sharp downturn, swing by:

 

www.gainspainscapital.com

 

Best Regards

Phoenix Capital Research

 

 

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Tue, 03/25/2014 - 21:22 | 4592506 GooseShtepping Moron
GooseShtepping Moron's picture

Funny, I wrote the very same thing about an hour after the press conference. Can I get a job at Phoenix Capital?

Tue, 03/25/2014 - 21:14 | 4592486 EggSlayer
EggSlayer's picture

She sees a bubble? Or she just finally realized that the fed increased the size of their balance sheet by $2.25 trillion in 5 years... I'd agree with you if she was hastening the process but shes only following along with what was scheduled.

Tue, 03/25/2014 - 21:05 | 4592444 therevolutionwas
therevolutionwas's picture

She will not be allowed to continue the taper.   Interest rates would be too high, and government could not afford higher interest on the debt.

Tue, 03/25/2014 - 20:20 | 4592330 DavidC
DavidC's picture

I'd be mightily impressed if she has the balls (no humour - English spelling - intended) to show that she means business, but I'm not convinced.

DavidC

Tue, 03/25/2014 - 20:15 | 4592191 Pee Wee
Pee Wee's picture

Have to agree with others, anyone thinking that the fraud cartel won't continue with "business as usual" is the greater fool.

Of course, only fools are long this shit-show "market" anyway.

Integrity in fools fiat is gone.   Without complete decimation of anything/everything quantified in fraud, it is synthetic "prosperity" from here on out.  Fascists wet dream.

Second verse, same as the first.

Tue, 03/25/2014 - 21:45 | 4592562 new game
new game's picture

we are farce for following the farce. fuck the farce and tend to the garden or change your oil or go for awalk/bike ride...

Tue, 03/25/2014 - 18:54 | 4592079 rlouis
rlouis's picture

Say what you will, I don't think Yellin has the balls.

Tue, 03/25/2014 - 18:47 | 4592053 Stuck on Zero
Stuck on Zero's picture

How do you know when there is a big problem? 

When all the financial assets in the world could purchase all the labor in the world for the next 50 years.

 

Tue, 03/25/2014 - 18:40 | 4592029 fijisailor
fijisailor's picture

No the punchbowl is not being taken away.  The FED's balance sheet is expanding rapidly.  It increased by $104.8 billion in Feb.

http://www.cnbc.com/id/101497635

 

Tue, 03/25/2014 - 19:29 | 4592192 Conax
Conax's picture

+1

Watch what they do as opposed to what they say.

 

Tue, 03/25/2014 - 19:34 | 4592205 fijisailor
fijisailor's picture

Yeah all these FED meetings are just cheap theater to calm the masses.

Tue, 03/25/2014 - 18:22 | 4591959 Rafferty
Rafferty's picture

Rubbish.  Once the Free Shit Army start chimping out the bowl will be replenished and all will be happy again.

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