This page has been archived and commenting is disabled.

Is The Fed To Blame For The Bursting Of The Tech Bubble?

Tyler Durden's picture




 

Correlation is not causation but...

 

 

As a reminder Fed Governor Dan Tarullo (in charge of supervision and regulation) also warned (on Feb 25th):

  • *TARULLO SEES RISK OF LARGE LOSSES IN LEVERAGED LOAN FUNDS
  • *TARULLO: FARMLAND, SMALL TECH FIRM VALUATIONS SEEM `STRETCHED'
  • *TARULLO SEES RISK OF LARGE LOSSES IN HIGH-YIELD CORPORATE BONDS
  • *TARULLO FAVORS KEEPING OPTION OF USING RATES AGAINST BUBBLES

How soon we forget?

"expectations fostered by forward guidance of continued low rates, may be incentivizing financial market actors to take on additional risks to boost margins, thereby contributing to unsustainable increases in asset prices and a consequent buildup of systemic vulnerabilities."

Don't fight the Fed!

And what he said last night...

  • *TARULLO SAYS POLICY HASN'T CREATED 'PREFERRED' RECOVERY
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 04/10/2014 - 11:53 | 4643539 q99x2
q99x2's picture
Harvard study: Your share of the federal debt is $106,000
Thu, 04/10/2014 - 12:00 | 4643559 centerline
centerline's picture

Before including unfunded liabilities.

 

An oldie, but a goodie...

http://economicedge.blogspot.com/2008/11/death-by-numbers.html

Thu, 04/10/2014 - 12:07 | 4643615 seek
seek's picture

What's even more awesome?

Debt chart from your link (2008)

Debt chart from Fed (today)

Gotta love that change in the Y axis.

Thu, 04/10/2014 - 12:10 | 4643641 Two-bits
Two-bits's picture

Measured in millions of millions.

And the fact that they chose to end the y with 18m?  Lets make this chart look as bad as possible.

 

Thu, 04/10/2014 - 12:10 | 4643649 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

No market breaks yet?!? How is that possible???

Thu, 04/10/2014 - 12:12 | 4643666 Two-bits
Two-bits's picture

Tyler will be posting the trigger levels any minute now.

Thu, 04/10/2014 - 13:00 | 4643914 Joe Davola
Joe Davola's picture

Janet showed them nerds who's boss!

Thu, 04/10/2014 - 17:22 | 4644914 N2OJoe
N2OJoe's picture

Armed citizen study:

My share of the National Debt is: Come and take it when this shitshow collapses!

Thu, 04/10/2014 - 12:13 | 4643668 seek
seek's picture

And moves to 17 million millions from 10 million millions...

I love all the old 2008 doom blog postings... not because they're wrong (they aren't, other than timing), but that everyone would be euphoric if we could turn the numbers back to what they were when the shrieking about economic collapse started!

Thu, 04/10/2014 - 13:28 | 4644012 Herd Redirectio...
Herd Redirection Committee's picture

One man's economic collapse is another's economic decay.

The reference from the very start was the Roman or Ottoman Empires.   Neither disintegrated overnight.  The Ottoman Empire was kept on life support by the Brits and French (bankers) to make sure Russia didn't gain huge swaths of territory (if a sudden collapse of the empire was allowed to occur).

Thu, 04/10/2014 - 13:32 | 4644016 Alea Iactaest
Alea Iactaest's picture

One man's economic decay is another man's opportunity.

Welcome to the new normal. Now take your meds.

Thu, 04/10/2014 - 12:31 | 4643767 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

Since the Federal Government can issue money free of interest why do they need a middleman?

Thomas Edison (paraphrased)

Just wait until the interest rates begin to go up.

Thu, 04/10/2014 - 12:59 | 4643911 marathonman
marathonman's picture

You want to see inflation?  Wait until the government can issue all that money to buy votes for 'free'. 

Thu, 04/10/2014 - 12:10 | 4643650 centerline
centerline's picture

Yeah, even more parabolic.  These systems just don't "jump" to some sort of new steady state utopia.  They just break and something else replaces it.

Thu, 04/10/2014 - 12:23 | 4643740 new game
new game's picture

one could factor in the real value of the dollar 08 to now and see the parabolic curve has some moar life before it falls in to a heap of squiggly lines or shall i say a pile on the carpet...

Thu, 04/10/2014 - 12:30 | 4643763 centerline
centerline's picture

http://seekingalpha.com/article/195012-debt-the-chart-of-the-century

Nate did this chart too.  I was able to match it using FED data.  But, the baseline assumption I did not have and had to estimate.

Anyhow, what this indicates is that we are in "cannibalization" territory.  But, as such, there is room to run.  Just indicates though that every step forward the math is compounding towards a collapse.  The corollary being final leg up in a parabolic move.

Thu, 04/10/2014 - 13:05 | 4643938 MickV
MickV's picture

Economic edge was a great blog, too bad Nate shut it down, but there was basically nothing left to say but wait for the crash.

Thu, 04/10/2014 - 11:56 | 4643562 Relentless101
Relentless101's picture

Awesome! I hear that some of those educations paid for with my future tax dollars could invent the next facebook! Gonna change the world.

Thu, 04/10/2014 - 11:56 | 4643571 Bunga Bunga
Bunga Bunga's picture

... and how you can rid of that share in 1..2..3

Thu, 04/10/2014 - 12:00 | 4643589 seek
seek's picture

Per capita it's about 55K. Per taxpayer, it's about 106K, and that's counting people that have negative returns (EIC etc.)

Doesn't matter, it'll never get paid and wiped out in the reset. The next Harvard study will imply something like "average bank customer loses $50K to bail ins" but the actual study headline will be "average bank customer rewarded with $100K in [unredeemable] bank equity."

Thu, 04/10/2014 - 12:01 | 4643594 maskone909
maskone909's picture

$106,000 will be worth pennies on the dollar in future money valuations.  so there is always that to look forward too?  yay

Thu, 04/10/2014 - 18:37 | 4645321 jjsilver
jjsilver's picture

it's not my debt, nor am I a surety for that debt. However, voluntary servitude is lawful.

Thu, 04/10/2014 - 11:55 | 4643540 maskone909
maskone909's picture

i like waterfalls better

 

its pathetic that the financial world must run for cover at the mere mentioning of valuations from these fed people.  we are all slaves to the central planners.  there are no free markets.

Thu, 04/10/2014 - 11:54 | 4643550 A_Nejad
A_Nejad's picture

Cry babies bitchez...you live by the sword, you die by the sword.  They'll never learn.

Thu, 04/10/2014 - 11:56 | 4643567 Seasmoke
Seasmoke's picture

Yes Alan Greenspan was to blame.

Thu, 04/10/2014 - 12:38 | 4643806 new game
new game's picture

for 100 years and even before that, bankers and the federal reserve have been to blame, at least on the surface. layer it down and one gets to the source, humans needing control by systems of power structure. many species live like this and don't question the outcome. bees, ants, wolves and humans. the more social and advanced the more likely to eventually be fucked by themselves (sociopathic individuals). in lower intelligence animals this trait is not rewarded.

Thu, 04/10/2014 - 11:57 | 4643569 NOTaREALmerican
NOTaREALmerican's picture

Ok,  I don't have time to check this, but if Tarullo has a wise looking beard then I'd say yes.  

Thu, 04/10/2014 - 11:56 | 4643573 ilovemilken
ilovemilken's picture

The new discount dividend model equation D1 / (r - QEinfinity)

Thu, 04/10/2014 - 12:00 | 4643584 Hulk
Hulk's picture

Not again !!!

Thu, 04/10/2014 - 11:59 | 4643585 dbTX
dbTX's picture

The Fed is to blame for everything negative in our once great financial system.

Thu, 04/10/2014 - 12:02 | 4643604 NOTaREALmerican
NOTaREALmerican's picture

Re:  once great financial system

So,  pre 1920's things were great?    

Seems like things were roughly the same, actually. 

Thu, 04/10/2014 - 13:42 | 4644057 oklaboy
oklaboy's picture

do you mean when the same mercury dime bought the same amount of gas it did then and today?

Thu, 04/10/2014 - 12:04 | 4643618 esum
esum's picture

qe and wax wings can only get you so close to the sun

Thu, 04/10/2014 - 12:06 | 4643628 lasvegaspersona
lasvegaspersona's picture

It is stunning to hear them state the obvious as though they were just learning of the possibility....as in "there is a funnel cloud in the field next door..It might be a tornado".

And these guys make policy and determine the cost of every item on the planet.

Thu, 04/10/2014 - 12:18 | 4643682 Chuck Knoblauch
Chuck Knoblauch's picture

The FED creates an environment, and takes no responsibility for the behavior of the lifeforms created for that environment. Kind of sounds like the FED playing GOD. God was smart enough to know Eden wasn't too big to fail.

Thu, 04/10/2014 - 12:15 | 4643693 Pareto
Pareto's picture

Said it before......say it again, "the FED can change what things look like, but the FED can never change what things are." (Grant, James., Dec. 2013).  The most poignant thing anybody has ever uttered about the FED, to anybody anytime, anywhere.....EVER.

Thu, 04/10/2014 - 12:21 | 4643728 Chuck Knoblauch
Chuck Knoblauch's picture

The FED cannot alter Human Nature. The academics don't even consider it in any of their policy moves.

Thu, 04/10/2014 - 12:39 | 4643816 disabledvet
disabledvet's picture

there was a bubble in high yield debt LAST YEAR...and the Fed popped that thing as per their mandate and "why everyone complained about Alan (too low for too long) Greenspan."

The Fed didn't create that bubble...nor would it be possible for the Fed to do so even if they wanted to. That bubble was created by investors and their manic search for yield producing assets no matter the consequences. AS A CONSEQUENCE they bid up the price of debt to levels that truly WERE astounding (with the Apple "top" marking an almost TO THE DAY call of the bubble being burst.)

There is no way to put this genie back in the bottle and those now long this market are now not only long the "greatest recovery in history" but have been long this recovery for almost exactly a year now.

I'm sorry but I fail to see how a full on confrontation BY Russia WITH the ENTIRETY OF THE WESTERN WORLD is inflationary. "All options are on the table" and while I really do love Putin's moxie here I think he is a TOTAL NUT for doing this.

France, Turkey and Great Britain alone can not only secure the Black Sea but cut off the entire population of Crimea and create a total nightmare for the so called "pro Russian population" there.

To fight this Putin is going to need some truly impressive air logistics....something not even Europe has at the moment actually.

Already Belarus and Kazahkstan are not "pom-pomming" this thing and since Kiev has now argued that Russia owes it 25 billion for seizing Crimea by force "plus interest" thinking long and hard a full scale invasion and overthrow of a soon to be overwhelmingly democratically elected Ukrainian majority should indeed worry our lifelong friends from the North Country.

Needless to say Zero Hedge is a winner no what happens over there.

Although Wolf Blitzer's never ending coverage of Flight ME 370 is pretty impressive. I'm long a "spin off of Wolf Blitzer News" from CNN here actually as the rest of CNN is left reporting on trials and travails that Joe Fitzsimmons, stray dog collector from the small town of Parsons, Indiana has been having woe these many years becomes front page news for the next ten years.

Thu, 04/10/2014 - 13:49 | 4644060 TPTB_r_TBTF
TPTB_r_TBTF's picture

In Cold War II there will be no direct "battles" between NATO and Russia.

 

Any wars will be fought by proxy, just as they were in Cold War I.

 

Example- Syria.

 

New Confrontation between NATO and Russia is necessary for an economic recovery!  Each side will scare their sheeple with stories of the enemy and make excuses for increasing "defense" spending, which in turn will create jobs (*).  Cold War I was not all that bad, unless someone was actually caught up in one of the hotspots.  I can understand the fear of Nuclear War which you yougins have, but many of us grew up with that threat and another Cold War is really no big deal (unless you happen to be near a hotspot).

 

(*) A Keynesian does not actually have to break a lot of windows to spur an economy.  The threat of windows breaking can also be used.  The sheeple will glady go along because,

  1. they will have cush union jobs in the MIC and
  2. their kids' bedroom windows will seem safe.

 

DonT worry:  A Cold War, when played by the rules, can keep our kids and the homeland safe.

 

Edit:  in a Hot War, the Hotspot comes to you.

Thu, 04/10/2014 - 12:55 | 4643888 Philalethian
Philalethian's picture

Breaking: 21 ayes say lois lerner is to be held in contempt of congress. There were 12 no votes.

Thu, 04/10/2014 - 12:55 | 4643891 Rising Sun
Rising Sun's picture

Fed Governor Dan Tarullo isn't to blame, but he's a good enough excuse.

 

Now historians can fill up textbooks with spin about how Dan's big mouth fucked the market  - for future generations to read.

 

 

Thu, 04/10/2014 - 13:01 | 4643924 LooseLee
LooseLee's picture

"No, the FED is the CAUSE and chief enabler of the inflation of the tech BUBBLE. There likely would be no BUBBLE if not for the FED.

Thu, 04/10/2014 - 13:54 | 4644014 TPTB_r_TBTF
TPTB_r_TBTF's picture

Somebody needs to cause the volatility.  We canT scalp without it.

Thu, 04/10/2014 - 13:49 | 4644092 combatsnoopy
combatsnoopy's picture

No, the bubble was caused by Tech.  A few who made it to the top put up so much red tape for business creation and IPOs that the literally killed the economy including massive trade/investment DEFICITS because you can't grow the employment sector.  Tech then used UNDISCLOSED forward and trailing PE Ratios as the HFTs pushed up the price of their stocks with market caps hidden.  Techies also offshored jobs to China and accounting positions to India-which subsidizes the college education of their own citizens.

Some of these techies from other countries who did well in SV thank US Taxpayers for the development by outsourcing jobs to THEIR motherlan instead of lobbying for better business friendly environments in CA-because they only scored well in tech.  Not finance and economics.   Many of these restrictive policies are the same ones that caused their motherland to become the 3rd world shithole that it is.  Like India and China. 

Yahoo, Google AND the other one...I think it's Apple?  Oh and Facepage.  They get massive wicked tons of help from the US government.  CLinton's Robert Rubin's assistant Sheryl Sandberg is the revolving door between the US government and Facebook- how else would she be a billionaire?

The rude bitch is too arrogant and nasty to thank the taxpayers for what she has. 

Google is great- Google delivers value.  Google couldn't make that profit margin from advertising, they got it from the US government paying them for data.  The same goes for the others.  Their idea of "business creation" is a lame start up featuring nepotistic connections as the owners who go through an M&A because they never intended to grow, go public, etc.  And this is how these nepotistic power tripping freaks make their buddies rich at the expense of AMerican taxpayers.  THEN their boomer cohorts passed deregulation so that non-trust fund bitches cannot afford to live here.

Oh btw, the ASSHOLE techies who had money to flip houses with in order to rob people in need of shelter?  Fuck you too!  Bunch of insecure, self lathing GOLD DIGGING sociopaths.
 
Since the AF developed and funded internet development- why aren't they running these techie companies? 

Back in 1996, there were 675 IPOs.  In 2012- there were like?  20 IPOs MAYBE.   Bernanke and Yellen failed! 

Tech also has the scoop on HFT.  If they created it, they can destroy it.   THey didn't.  That right there speaks volumes.  Former Army guy Voila at Virtu could tell everyone why.  HE too, at the expense of the US Taxpayer- will be a billionaire if Virtu IPOs.

Also, tech was developed and funded by the military.  Unlike the freeways and the microwave- we're BARELY seeing any cost efficient value created except for thigns like Google, Zerohedge and Excel. 

I'm sorry, Excel (and Access) is more than enough to eliminate the need for Quickbooks, Peachtree, JD Edwards, Salesforce... and if Comcast gets out of the way- we can implement either bandwidth from the Netherlands or South Korea to compete with the HFT cooking the market. 

On the other hand, Mofo has revolving doors with the US government which is why Apple uses them.  If Mofo was publicly traded, uh.... best buy yet. 

No seriously, tech did it to themselves.  They "innovated" so much that without their idea of "social pressure" (YAWWWN!  JOHN LENNON WANNABE APPLE HYPESTERS ARE STUPID!)- tech honestly outside of a laptop, PC and bandwidth really hasn't added that much value to my life. 
It's only for the sock puppet armies and other various forms of thought manipulation funded by Chinese loans to the US Treasury. 

Thu, 04/10/2014 - 14:31 | 4644235 Esculent 69
Esculent 69's picture

May i be so bold as to offer multiple reason for the bubble burst?

Why was there a tech bubble?  New technology yes, but what was the big driver? Every person was prompted by the federal government to update their computers due the fact that computers wont be able to calculate past the year 2000 or Y2K right?

that meant personal AND government computers needed to be updated with "new and improved" software that actually was a secret way for the enn essay to get into our computers and be their recording your every key stroke. The Fed was the money behind the driving of this new market as well as the new financial devices that were being created.  

Then the repeal of Glass-Steagall set the timer for the fed to eventually get to the point where it owned the market.  But, once jan 1, 2001 hit that was the end of the buying of new computers or software or anything.  this helped precipitate the decline in .com's of all sorts.

My point is that the federal government was the one to give us this lie about Y2K that helped set the stage for where we are today.  Yes? No?  Love to hear it some thoughts.

Edit- Oh and good night/day francis sawyer. wherever you are?

Give us our fight club back Tylers.  You are not your khakis.

Do NOT follow this link or you will be banned from the site!