Yellen's "Irrational Exuberance" Moment Arrives As She Pops Momo, Biotech, Social Media Bubble

Tyler Durden's picture


On one hand Janet Yellen, Series 7, 63-certified, and a consummate expert on equity valuation said the following soothing words about market values:

While prices of real estate, equities, and corporate bonds have risen appreciably and valuation metrics have increased, they remain generally in line with historical norms. In some sectors, such as lower-rated corporate debt, valuations appear stretched and issuance has been brisk.

On the other, and sadly for holders of biotech and social media stocks, Yellen appears to have just burst that particular bubble.

Nevertheless, valuation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year. Moreover, implied volatility for the overall S&P 500 index, as calculated from option prices, has declined in recent months to low levels last recorded in the mid-1990s and mid-2000s, reflecting improved market sentiment and, perhaps, the influence of “reach for yield” behavior by some investors....


... signs of risk-taking have increased in some asset classes. Equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched, with ratios of prices to forward earnings remaining high relative to historical norms. Beyond equities, risk spreads for corporate bonds have narrowed and yields have reached all-time lows. Issuance of speculative-grade corporate bonds and leveraged loans has been very robust, and underwriting standards have loosened. For example, average debt-to-earnings multiples have risen, and the share rated B or below has moved up further for leveraged loans.

Call it Yellen's "irrational exuberance" moment. Also call it a warning.


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Tue, 07/15/2014 - 10:24 | 4958861 Stoploss
Stoploss's picture

Looks like gold will be the outperformer.

As usual..

Tue, 07/15/2014 - 10:26 | 4958869 Croesus
Croesus's picture

Nah, that means S&P 8,000

Tue, 07/15/2014 - 10:28 | 4958879 MillionDollarBonus_
MillionDollarBonus_'s picture

This is all part of Yellen's plan to taper the equity rally and make sure that stocks don't get ahead of themselves. For the long term buy-and-hold value investor, this is just noise. I'm impressed that unlike many of her predecessors, Yellen is considering a complete range of economic indicators, including equity prices. Maybe if our Federal Reserve had paid closer attention to housing prices from 2002 to 2008, they could have prevented the housing collapse. It's important that economic planners take every indicator into account when planning the economy, in order to achieve optimal results.

Tue, 07/15/2014 - 10:32 | 4958896 kliguy38
kliguy38's picture

get lost you key stroke douche bag......

Tue, 07/15/2014 - 10:45 | 4958950 Headbanger
Headbanger's picture

On a busy eight lane highway too!


Tue, 07/15/2014 - 10:59 | 4959003 smlbizman
smlbizman's picture

i guess cynk just went down the sink....

Tue, 07/15/2014 - 11:06 | 4959056 slightlyskeptical
slightlyskeptical's picture

Saw a story on bloomberg. Trader who shorted CYNK at $6 has lost his job.

Tue, 07/15/2014 - 12:07 | 4959368 Hippocratic Oaf
Hippocratic Oaf's picture

Warren just asked yoda to comment with a 'straight face'

Not so sure what that means

Tue, 07/15/2014 - 16:09 | 4960338 newbie vampire
newbie vampire's picture

"Saw a story on bloomberg. Trader who shorted CYNK at $6 has lost his job."

This is what happens when Insanity rules.  All courtesy of the Fed.  MOAR MOAR MOAR !


Tue, 07/15/2014 - 10:32 | 4958898 ShorTed
ShorTed's picture

Excellent troll MDB...back to your old standards!

Tue, 07/15/2014 - 12:17 | 4959402 Greenskeeper_Carl
Greenskeeper_Carl's picture

Agreed. This guy is just fucking around. It amazes me so few see it for what it is. It's satire. Notice how many people disappear here for trolling stupid shit or pimping their bogus blogs, yet MDB is still around. Makes me wonder, has anyone ever seen MDB and Tyler durden in the same room together....?

Tue, 07/15/2014 - 12:54 | 4959537 Dollarmedes
Dollarmedes's picture


Tue, 07/15/2014 - 13:15 | 4959621 jbvtme
jbvtme's picture

carl...good call

Tue, 07/15/2014 - 10:33 | 4958902 moonman
moonman's picture

So true, I do not understand these posters on ZH who feel like they are smarter than our leaders and do not think that everything our government does is for our own good.

Tue, 07/15/2014 - 10:36 | 4958910 jmcadg
jmcadg's picture

Hey Moonman - you up MDB's moon - twat.

Tue, 07/15/2014 - 10:40 | 4958930 moonman
moonman's picture

Good too see another dumb fuckstick who does not recognize both of us are being sarcastic, do you need to the little <sarc> tag everytime?


Tue, 07/15/2014 - 10:50 | 4958965 tarsubil
tarsubil's picture

If you fool people, take it as a compliment.

Tue, 07/15/2014 - 12:01 | 4959347 Son of Loki
Son of Loki's picture

"Irrational Exuberance".....................................Sounds Bullish!

Tue, 07/15/2014 - 12:46 | 4959498 RevRex
RevRex's picture

There are so many braindead stupes here it is hard to tell.....


Just look how many say stupid shit like "Busch did it two and boath party's hour the same".....

Tue, 07/15/2014 - 14:36 | 4959905 allgoodmen
allgoodmen's picture

I can see how it might be hard to parse your <sarc> especially with MDB on board today

Tue, 07/15/2014 - 16:14 | 4960361 newbie vampire
newbie vampire's picture


Good too see another dumb fuckstick who does not recognize both of us are being sarcastic, do you need to the little <sarc> tag everytime?"

 Reckon you might do too.  Gits me a lil worried when folks take offence at sarcasm for face value.

Tue, 07/15/2014 - 11:56 | 4959314 GovernmentMule
GovernmentMule's picture

The moonman lead post proudly sponsered by the NSA. Thank you for reading and please tune in again soon...

Tue, 07/15/2014 - 10:40 | 4958921 TabakLover
TabakLover's picture

MDB, what size strap-on does Yellen do you with?

Tue, 07/15/2014 - 11:11 | 4959079 syntaxterror
syntaxterror's picture

No strap-on needed with that tool.

Tue, 07/15/2014 - 12:07 | 4959370 pods
pods's picture

"She's got a cock like a horse!"

<hat tip Slapshot>

Tue, 07/15/2014 - 12:35 | 4959467 Squid Viscous
Squid Viscous's picture

looks like she opened pandora's box, in more ways than one

Tue, 07/15/2014 - 10:55 | 4958991 Seasmoke
Seasmoke's picture

MDB has lowered expectations so low, that this looks like one of his bests posts.....MDB is good, really sneaky good !!

Tue, 07/15/2014 - 11:14 | 4959105 NoDebt
NoDebt's picture

You had me at "optimal results", MDB.  I keep thinking "optimal for whom, exactly?"

Tue, 07/15/2014 - 11:22 | 4959128 orez65
orez65's picture

Dear MillionDollarBonus, regarding your comment:

" ... economic planners take every indicator into account when planning the economy ..."

That is the problem, s..t head!!

It's called "central planning", as practiced in the ex Soviet Union !!!

A free market economy does not need any central planning !!

Tue, 07/15/2014 - 11:26 | 4959180 donsluck
donsluck's picture

New to the board, eh? MDB is a master at the straight-faced sarcastic zinger!

Tue, 07/15/2014 - 11:34 | 4959185 MillionDollarBonus_
MillionDollarBonus_'s picture

"A free market economy does not need any central planning"

Are you serious? Every economy in the world has a significant amount of central planning. Without central planning more than half of the world's economy would simply dissapear, including the entire healthcare systems of countries like Canada and the UK!!

Tue, 07/15/2014 - 11:35 | 4959222 Jack Sheet
Jack Sheet's picture

Cretin. Bugger off.

Tue, 07/15/2014 - 11:59 | 4959339 slightlyskeptical
slightlyskeptical's picture

The point being if there is Central planning then it is not a free market economy. It means there is not a free market economy anywhere in the world. As such anyone spouting out about free market economies is in reality a moronic sheep.

Tue, 07/15/2014 - 12:02 | 4959350 donsluck
donsluck's picture

Just to play along, capitalism cannot survive in a planned economy. They are mutually exclusive. A planned economy is a central tenent of totalitarianism. Think of it this way, money represents almost everything. If you control the way money is "printed", distributed, earned, taxed etc. you control everything. IE totalitarianism.

Tue, 07/15/2014 - 13:36 | 4959680 ejmoosa
ejmoosa's picture

"more than half of the world's economy would simply dissapear, including the entire healthcare systems of countries like Canada and the UK!!"


and that would be bad because...?

Tue, 07/15/2014 - 11:24 | 4959171 McCormick No. 9
McCormick No. 9's picture

Can anyone here do beter than Yellen? Look, we all know that we should have let the system implode in 08. But we didn't. Now, the problem is even worse, and there are fewer solutions. What would you do in Yellen's case?

Scenario 1) Continue to print mad ZIRP but let the equity bubble take its own course and explode on its own. Result- total destruction of modern society as a deflationary depression of unimaginable magnitude is unleashed upon humanity.

Scenario 2) Raise interest rates slowly but steadily until  the Fed rate reaches 2%. Result- a massive financial coronary as liquidity dries up faster than the coochie of a menopausal housewife with resentment issues. Then, as no-one can get debt-money to run their vig-payment scams, a massive deflationary depression sets in with actual Holodomor victims lying in the streets.

Scenario 3) Prosecute banksters and put them in jail and/or execute them. Govt stockpiles staple food items for redistrbution. Declare a debt moratorium and reset the entire system, based on a gold standard. In the interim, there will be issues of starvation and social dislocation, but you feed people until the economy gets back on its feet. Result: A total destruction of the Nuland-et al financial vampire system, and a return to real productivity without the onerous burden of usury debt slavery. This is totaly unacceptable to the Nuland et al drones like Yellen, so she will continue to muddle onwards towards a total disaster. But if the tribe survives, collateral damage is not important.

Tue, 07/15/2014 - 11:33 | 4959213 MillionDollarBonus_
MillionDollarBonus_'s picture

I'll assume your more extreme suggestions are just a joke, but the truth is many of your proposals have already been implemented in the Dodd-Frank bill passed by Predident Obama in 2010, which is one of the reaons we are seeing such promising growth in the economy. The Dodd-Frank bill amde a number of legislative changes, including improved oversight of the economy by government regulators and a number of changes to improve the stability of the financial system. 

Tue, 07/15/2014 - 11:37 | 4959231 vulcanraven
vulcanraven's picture

We Predident now

Tue, 07/15/2014 - 12:00 | 4959340 Beam Me Up Scotty
Beam Me Up Scotty's picture

MDB--Dodd-Frank also includes the provision enabling the banks to Corzine your bank account.  I suppose you support that as well.  As a reminder, dollars are nothing more than a representation of your labor.  You earned them, you paid taxes on them.  So if they bail-in the banks, its nothing more than outright THEFT of my LABOR.

Tue, 07/15/2014 - 12:05 | 4959364 donsluck
donsluck's picture

At the risk of a -1 vote, I need to point out that deposits in banks under FDIC protection are not insured over $100,000.00. Therefor, you are assuming risk when your deposits exceeed these limits.

Tue, 07/15/2014 - 12:29 | 4959414 Beam Me Up Scotty
Beam Me Up Scotty's picture

Its actually $250,000 now.  However, that doesn't preclude them from taking more than that if there are bail-ins.  Remember, they can write the rules and change the rules any time they want.  It won't be in your favor or mine though.  Just a reminder, however, that dollars are just a representation of your labor.  Taking your dollars is nothing more than taking your labor.  Taking your labor is slavery.

Tue, 07/15/2014 - 12:53 | 4959532 Herd Redirectio...
Herd Redirection Committee's picture

Don't call it a 'bail-in'.  Call it 'creditors' doing their part to save the banks they love.

Tue, 07/15/2014 - 13:34 | 4959668 Beam Me Up Scotty
Beam Me Up Scotty's picture

That might be the politically correct thing for them to call it, or the Orwellian thing to call it, but it's still theft. Most people "think" they are putting "their" money into the bank for safekeeping. Not to become a shareholder.

Tue, 07/15/2014 - 11:37 | 4959232 Jack Sheet
Jack Sheet's picture

Y o u are the joke here.

Tue, 07/15/2014 - 12:16 | 4959409 OC Sure
OC Sure's picture



As long as there is "monetary policy" there will never be stability;

Effect, be-cause.

As long as there is "monetary policy" there will always be tyranny;

Effect, be-cause.

The problem is "monetary policy."

The solution is to resolve the problem.

Tue, 07/15/2014 - 11:57 | 4959317 Calmyourself
Calmyourself's picture

3, my children deserve a chance to avoid this:

third down;

Tue, 07/15/2014 - 12:44 | 4959496 Excursionist
Excursionist's picture

It is so, so telling when a Fed chairman opines on equity sector valuations.  I read the transscript and despite my cynicism that I thought couldn't get worse, I still had a WTF moment.

Tue, 07/15/2014 - 11:43 | 4959255 moneybots
moneybots's picture

"Maybe if our Federal Reserve had paid closer attention to housing prices from 2002 to 2008, they could have prevented the housing collapse."


It was Greenspan's intention to create a housing bubble.

Tue, 07/15/2014 - 11:44 | 4959259 Blano
Blano's picture

I green arrowed you for finally showing up again.  Where the hell have you been????

Tue, 07/15/2014 - 11:52 | 4959296 jughead
jughead's picture

"Economic planners"?  Is that like "military intelligence"?

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