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Yellen's "Irrational Exuberance" Moment Arrives As She Pops Momo, Biotech, Social Media Bubble
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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"The Fed was created by the big banks to eliminate competition and guarantee profits for the big banks."
-- hedgeless_horseman
Call me strange, but I rather enjoyed watching Yellin throw social media under the bus.
Nevertheless, valuation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries…
--Fed Chairman Janet Yellen
But notice it was the “smaller firms,” not the big social media firms such as Facebook, Google, Dell, Microsoft and HP. Liberty means competition: the purpose of the banker-controlled Fed-IMF-World Bank entity is to destroy its competitors, to destroy liberty.
By hitting the smaller sites and businesses, this substantiates government’s unwritten partnership with the highly influential big social media sites; Google is the second largest and the closest entity to government that can be found, hence, the Fed support.
windcatcher summed it up today on ZH:
IMF stands for “adios mother fucker” to once sovereign and independent nations.
Treasonous “open border” secret trade agreements of the North American Union is nothing new, the plan has been on the books, funded and underway for the last 13 years. The target of “open border” illegal immigration is to destroy our American Sovereignty and American Independence with government and NGO funded and orchestrated attacks on our borders with the use of illegal immigrants. The second objective is to create civil unrest and chaos which the criminals in Washington specialize in.
I know most Americans cannot believe that the attack on 9/11/01 was an “inside Job” that orchestrated us into debt with “terrorist wars” for the last 13 years. They cannot believe that our Representative Republic, constitutional democracy (government of, for and by the People) has been purposely destroyed and replaced with a totalitarian fascist police state.
Americans cannot believe that our Free Enterprise System of capitalism (free from corporate monopoly) and “Fair Trade” has been destroyed by “Free Market” monopoly corporatism and “Free Trade” (multinational corporate monopolies are free to steal whatever they want, from whomever they want, and do it legally).
Americans cannot believe that Washington would purposelessly bankrupt the USA. Debt is Wealth, they have been brainwashed to believe, --as we go underwater.
Mission Accomplished! Bush/Obama/banksters and crew!!!!
Our democracy is gone, our Free Enterprise System of capitalism is gone. We are bankrupt! The grand ole United States of America, like Greece, Portugal and others is going into receivership of the BIS and the IMF (same criminal banksters). At that point, we are no longer an independent and sovereign nation and you and your children, as citizens, are legal debt slaves to the global central banksters.
The illegal immigration attack coincides with the UN Agenda 21st. Century attack and the North American Union attack that are sponsored by the same criminal banksters.
http://www.zerohedge.com/news/2014-07-14/guest-post-real-purpose-imf
Why do we have to listen to this woman talk...everyone knows that the source of all this exuberance is sitting on their trading desks at the NY FED. Close down that corrupt outfit and the problem is half solved.
Exactly. No Fed chairman, Yellen included, reads any speech or provides any information that has not been carefully prepared and structured beforehand by the Fed money trust. Bernanke could appear to be giving this speech without notes because of his talent; Yellen not so much.
Oh my GOD she popped the bubble!!!
Stocks are down 0.15%!!!
The collapse is upon us!!!
The sky is falling!!!
Lets just stop right here folks.
Lets stop fucking about, lets relieve ourselves of these old, wrinkly, degenerate shysters.
Let us as a 'Global Community' just stop the fore-play, the little bit touching and titilation, the slight touch of a bossom, the grope of a crotch, lets fuck off the playing hard-to-get, and go straight down to the dirty business.
Lets fucking hang these cunts.
They know the fuckers on the way, so lets work as a team and get this cunt done.
Bitchez.
:-)
In lieu of a market economy, America has the Fed economy.
And this is simply an arrangement between the money printer and the giant banks and large investors where value can be transferred from citizen assets to stock prices. Hence, the boom in equities.
David Stockman’s piece on Zero Hedge this week explains how the banks and big investors can be sure that the Fed will deliver its support and provides them every confidence that they can ride the boom without fear. Here’s Stockman:
“Moreover, this central bank sponsored regime of ZIRP and money market pegging contains a built-in accelerator. As carry trade speculators drive asset prices steadily higher and fixed income spreads steadily thinner—- fear and short interest is driven out of the casino, making buying on the dips ever more profitable and less risky. Indeed, the explicit promise by central banks that the money market rate will remain frozen for the duration and that ample warning of any change in rate policy will be 'transparently' announced is the single worst policy imaginable from the point of view of financial stability. It means that the speculator’s worst nightmare—–suddenly going 'upside down' due to a sharp spike in funding costs—-is eliminated by central bank writ.”
Nowhere is this Fed interested in the state of the economy or the welfare of American citizens. Its arrangement with the banks shows clearly that this is a deliberate run on America’s wealth and, hence, there is no mention of those being devastated.
its a Mark-It economy, mark it to model, mark it to myth, mark it to whathaveyou got?
I had no effing clue Pandora "internet radio streaming services" had a fucking IPO, higher valued than many small petroleum E&P companies who own tangible capital.
This world is fucking nuts.
This market allowed anything to be IPO'd for billions, and the fund managers are stepping over each other to buy. Like the DOT COM days.
Come up with a catchy Social Media name and you too could be an instant Wall Street made billionaire.
"Come up with a catchy Social Media name and you too could be an instant Wall Street made billionaire."
I think he did..."The world is fucking nuts"
Sounds catchy to me!
Private (nongovernmental) equity valuations are none of her business.
Why is she publishing her opinion on what they should be?
Stupid bitch.
Biddhy biddy ok buuck.
Another fuckin robot. She may be special, but my house smells like maple syrup. It's a tasty smell.
http://www.youtube.com/watch?v=pHn6Pe8p1RM&sns=em
historical norms
Bit cheeky talking about one thing being out of historical norms but totally ignoring inflation. Doesn't this have historical norms?
Jeezus. lady, if you people stopped trying to cunnythumb the economy perhaps we wouldn't be in the mess of which you speak.
Fed money goes around the world
Fed money undeground
Fed money got a mighty voice
Fed money make no sound
Fed money pull a million strings
Fed money hold the prize
Fed money weave a mighty web
Fed money draw the flies
No. 1 on the ZH HIT Parade.
Did she pass the Series 7?
jeezus h christ.
So many words to try to convince people she's a fucking clue what she's talking about.
Hard to believe how many people have lost touch with reality (no ZH's but all others) and proper economic fundamentals. Just the mear fact that the Fed is the most important and significant influence on market valuations these days says it all. The only message and information that is important is the Fed. Period! This dependency on the Fed is in no way, shape, or form healthy in any respect to allowing for proper price discovery in a freely functioning market. Not in equities, not in real estate, not in credit, not in PMs, nowhere.
The role of the Fed should have never reached this point where every market is dependent on their policies to function. The Fed should have been working quietly in the background, staying out of the limelight and performing its role without any fanfare, politics, egos, or greed but it just couldn't do it. Maybe its just me but 20 years ago, I just don't remember this much influence by the Fed on a periodic basis. Today it seems like everyday is another "Fed" day.
Hard to beleive we've reached this point where I came to the conclusion (being in my early 50's) that I properly will never see freely functioning capital markets again in my lifetime. The market's have become so twisted, so dependent on ZIRP, so politicalized (i.e., just think of the social unrest if another market crash occurs but this time, in all markets - equities, credit, real estate, etc.), and so corrupt that in effect what we are witnessing is the transition to the new norm, one that may never allow proper pricing of capital and risk to occur ever again.
It was fun while it lasted but now we've entered a new "Dark Ages". Let's hope the enlightenment period will come much quicker than my fear.
"Maybe its just me but 20 years ago, I just don't remember this much influence by the Fed on a periodic basis. Today it seems like everyday is another "Fed" day."
Remember? 20 years ago Greenspan was considered a God !!!
October 16, 2008 VIX Options Index Tops 80
Irrational Exuberance -- How I miss those days of yore.
A bit off topic - but what has Fischer been doing?
http://original.antiwar.com/smith-grant/2013/12/27/aipacs-fed-candidate-...
http://www.bloomberg.com/news/2014-02-06/fischer-to-sell-holdings-of-bla...
Working hard for Americans, no doubt, but any particulars?
America is in a financial war between its citizens and its central bank, the Federal Reserve. And one man, now, with this war, could be said to be guilty of treason, treason against the United States and in favor of another sovereign nation.
The man is Stanley Fischer, a back and forth citizen and official with Israel and the U.S. The Fed lends money to its own operatives to buy their own goods, to build their own power.
Here, in detail from Grant Smith, is a resume of conflict, conflict with the ideals of America by a man who has no more reason to be a US-financial official than to actually be the current chief planner for Fed policy…(a man whose dual national roles have amassed him a personal fortune of up to $56.3 million):
“…doings that shed light on Fischer’s controversial attributes – such as overhauling how U.S. aid and trade packages are delivered to Israel – have been mostly ignored. Appointing an openly dual Israeli-American citizen into the most important central bank in the world could be a watershed moment. While the doors of federal government have long swung open for Israel-lobby appointees focusing most – if not all – their energies on advancing the interests of a foreign state, any who were actually Israeli dual citizens have traditionally kept that a closely-guarded secret. Fischer’s long-term boosters, including the American Israel Public Affairs Committee (AIPAC), likely want to accustom Americans to openly dual citizens circulating between top roles in the U.S. and Israeli governments. A closer examination of Fischer reveals that average Americans have good reason to oppose his appointment, because his lifelong achievements for Israel have imposed high costs and few benefits to the United States while making peace more difficult to achieve.
Economics
“Stanley Fischer was born in Northern Rhodesia in 1943. He studied at London School of Economics and received a PhD in economics from MIT. He taught and chaired the MIT economics department and co-authored a leading macroeconomics textbook with Rudiger Dornbusch. Fischer joined the World Bank in 1988 and became the first deputy managing director of the International Monetary Fund (IMF) in 1994. He oversaw emergency bailout lending and austerity programs over Mexico, Thailand, Indonesia, Russia, Brazil and Argentina. High flying Citigroup – under the helm of Sanford "Sandy" Weill – recruited Fischer in 2002. There he rose to become vice president with a seven-figure pay package.
Israel
“Fischer has not only been an ardent supporter of Israel, his professional efforts began when he took sabbatical leave to Israel in 1972 and 1976-1977. He was a visiting scholar at the Bank of Israel in 1980. More importantly for Israel, Stanley Fischer won an appointment to the Reagan administration’s U.S.-Israel Joint Economic Discussion Group that dealt with Israel’s 1984-1985 economic crisis. In October of 1984, Israeli Prime Minister Shimon Peres arrived in Washington asking an initially reluctant Reagan Administration for an additional $1.5 billion in U.S. emergency funding – over and above the already-promised aid $5.6 billion aid package.1 The help amounted to U.S. taxpayers funding each Israeli citizen $1,650. Another key component of the plan called for a largely unilateral lowering of U.S. tariffs and trade barriers to Israel, a program initially called "Duty Free Treatment for U.S. Imports from Israel" but later repackaged and sold as America’s first "free trade" agreement. Over time the FTA reversed a previously balanced U.S.-Israel trading relationship for one that has produced a cumulative deficit to the U.S. that passed $100 billion in 2013. Seventy American industry groups opposed to the give-away in 1984 were disenfranchised when Israeli Economics Minister Dan Halpern and AIPAC illegally obtained a classified compendium of their industry, market and trade secrets to use against them in lobbying and public relations. An FBI espionage and theft of government property investigation was quashed before it could narrow in on those inside the U.S. government who delivered the secrets to Halpern.
“The U.S.-Israel Joint Economic Discussion Group fundamentally transformed U.S. aid to Israel forever. Before the Reagan administration, most U.S. aid to Israel took the form of loans that had to be repaid with interest. After the input of Fischer’s team, subsequent U.S. aid was delivered in the form of outright grants paid directly from the U.S. Treasury – never to be repaid or conditioned when Israel took actions the U.S. opposed…”
And so the story goes, on and on, along with this…
"As Bank of Israel governor, Stanley Fischer played a central role in coordinating the implementation of AIPAC-generated sanctions against Iran…"
And this…
"AIPAC, Fischer’s co-author of harmful U.S. economic policies on behalf of Israel, likely sees the Fischer appointment as an important test case to assess American tolerance for openly dual Israeli-American citizens running key U.S. federal agencies…"
Thanks, Duffy Duck, for this Grant Smith article, AIPAC’s Fed Candidate Stanley Fischer on a Warpath Against Iran, a must read in its entirety.
The Yellen Bubble.
About to burst.
7 is the magic number.
Or a little more.
Since they are printing
Worthless paper
Like there's no tomorrow.
"Irrational Exuberance"....
...gives me a boner hearing her say that......pleeeze, say it again....pleeeze......very very Bullish......
Whatever happened to "frothy"?
Calm down, heir remarks are already priced in.
While I dont' disagree we have bubbles developing all over the place, I totally disagree with Yellen picking specific bubbles to pop. This is beyond outrageous! Did her husband put on some short positions the day before? Honestly, I'm benefiting from her speech, but I still disagree with her doing it. What's more is I disagree with her sizing up real estate as being anything other than yet another bubble. Best she just STFU, but housing is overpriced currently because its totally dependent on foreign investment and equity money managers buying up what little supply exists today. The real health of housing should be apparent that even though interest rates are in a region that represents a generational low, each of the last 6 years saw new homebuilds much less than EVERY year for the 50 years prior to 2008. What happens when China again begins to restrict capital outflows?