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Irrational Exuberance 3.0: Fed Again Warns Of A Build Up In "Valuation Pressures"
The last time Janet Yellen, Series 7, 63 certified, warned of asset bubbles, aka the Fed's "Irrational Exuberance 2.0" moment, was back in July 2014, when the smallest of utterances led to a selling avalanche in biotech and social media stocks. This is what the Fed said back then:
"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.
It's time for the Fed's shot across the bow, this time explicitly warning of the "potential risks to financial stability." From the just released minutes.
Relatively high levels of capital and liquidity in the banking sector, moderate levels of maturity transformation in the financial sector, and a relatively subdued pace of borrowing by the nonfinancial sector continued to be seen as important factors limiting the vulnerability of the financial system to adverse shocks. However, the staff report noted valuation pressures in some asset markets. Such pressures were most notable in corporate debt markets, despite some easing in recent months. In addition, valuation pressures appear to be building in the CRE sector, as indicated by rising prices and the easing in lending standards on CRE loans. Finally, the increased role of bond and loan mutual funds, in conjunction with other factors, may have increased the risk that liquidity pressures could emerge in related markets if investor appetite for such assets wanes. The effects on the largest banking firms of the sharp decline in oil prices and developments in foreign exchange markets appeared limited, although other institutions with more concentrated exposures could face strains if oil prices remain at current levels for a prolonged period.
It's ok though: as the IMF previewed earlier today, asset managers may be responsible for the next bubble but it is only because of "rational bubble-riding" - you know, the kind that the Fed's macroprudential policies will promptly spot and fix post haste.
As for the other institutions whose "concentrated oil exposures" will rock the boat, we - like the Fed - just can't wait to find out who they are...
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Simple fix for low priced oil then... tax it till it is expensive enough to save the economy
Fuck Yeah, Let's invest and party like it is 1999. Rinse and repeat after every hangover.
Go banksters go. Go drive it to the moon, only if you promise not to return back.
So that means buy the S&P because it's valuation is under pressure and should be higher. I get it. Weekdays are always good days to buy the S&P especially Monday and Friday, oh and Wednesday as well as Tueaday and buy-the-dip-Thursdays too.
Like they just did in Belgium... but here they did it "to fight deflatio " and all the extra taxincome was just a windfall...
and people are more happy with their income than they where a year ago so it’s all good... so they say...
Considering the source of this so-called "irrational exuberance," it should really be called "irrational theft."
The banksters need to repay us.
"Guillotine the Fed. Audit the heads."
Translation: Sell bawnds and buy stawks. DO NOT buy barbaric relics!
NAHHH... everything is fucking Great! Buy Stock NOW!!!!!! (Bitches)
Well they could raise rates and cool this off?
LOL.
pods
What? The Fed created the bubblization of asset prices.
Created by greedspans bubble baths.
Could you bubble me in, next round?
I imagine writing the fed minutes is a lot like playing the glass bead game.
What? Magister Ludi ? Loved that book....but never actually learned how the Glass beads game was played ........better reread it soonest!
+1 for Magister Ludi reference.
That's her "O" face.
When the laugh turns into an immediate "cry"... Give her two doses of lithium!
I have always found it ironic that Yellen's head is shaped like a bubble.
Too bad there isn't such a thing as a stock market "bowl" because it would really be perfect.
I have always found it ironic that Yellen's head is shaped like a bubble.
Excellent!
The entire market complex is in a positive feedback loop of alpha chasing stupidity, caused by the nimrods in the world's central banks in an attempt at micromanaging global economies in order to prevent their member banks from losing money. Well here's a memo to you banksters: Eventually, the perceptions will change and the market participants will come to realize central bankers do not have the answers and in fact, have made things much worse for much longer for 99% than if they had done nothing. At that time the PFL will reverse and the market will crash.
The banks are not concerned with losing money, they are driven to purchase any and everything. How can you possibly lose money that you print out of thin air? Those assholes don't give a shit about losing your money, especially if they steal it.
They don't have any answers, because they don't care and answer to no one. Ownership has its privileges.
"Potter is not selling, Potter is buying". If this bitch crashes they will buy up all that's left and hail the new class of the poor.
The bankers really are geniuses..they put a little old lady in charge and no one can connect the fed policy with the personal asshurt anymore. It really is brilliant and should be a movie, if it wasn't already reality.
You may enjoy this then...
http://www.thepowerhour.com/news4/wizard_of_oz_what_it_means.htm
I talked with Bill Still who made a docu and a book about this...he is a great guy and talented as hell with truth telling:
https://www.youtube.com/watch?v=7qIhDdST27g
Kinda like "making" the President a black guy while they rape and pillage the middle class?
Cough...HYG...cough...
Sell Credits but please keep your subordinated stocks
Bubble Valuations you say? Surely you jest. Lets take a look at your books Jew-Granny and see just who is blowing.
When central bankers talk about riding financial bubbles it is way way too late to get back to reality without a whole lot of pain.
Kiss me, Janet !
Isn't it interesting we've had that "data glitch" little more than a year ago that spiked the RUT to 1260 and that spike in the SPY a few weeks ago that printed an equivalent of SPX at 2130.
And now we're pretty close to these levels and we get this IMF bubble riding and Fed valuations talks.
If you are interested in drones check out this site http://pickyourdrone.com/
Stawks lovin it, right back to recorder highs!
Okay, then raise rates!!!
Never!
Raise rates to pay more to us depositors??? Fat chance in hell. Don't pay on time with your credit card, no need to raise rates and you will still get hammered.
Janet, the merging of two heavily thin based GDP growth countries will not occur. Stop fantasizing with your dildo. This is fact, not your delusional project timeline study handed to you for homework completion.
Hey, Janet,
This is how God dispenses an economy, before mankind dispenses with it:
http://ariel.org/come-and-see.htm
5th down, The Dispensations of God, in written or audio form.
You can skip to the second to last (our) dispensation or listen to all
or not. And I'm sure you'll choose not to.
This from the same institution who's frontman said in back to back interviews,
"We're printing money." - Bernanke to Congress
"One myth that's out there is that what we are doing is we are printing money. We are not printing moiney." - Bernanke to 60 Minutes
The second statement is accurate. They aren't printing money, they're counterfeiting.
Stop whoring for Wall Street.
http://www.showrealhist.com/yTRIAL.html
http://patrick.net/?p=1223928
08' really kicked my ass, its really hard to watch this shit go down again.
I wish Chris Farley were here to add visuals to the Fed comments...
zerohedge @zerohedge 4m4 minutes ago
In 2015, US companies are expected to repurchase $450BN in stock. If instead they were to boost wages, this amounts to $3200 per worker"
And just think, shock horror, this might actually benefit the economy for a change instead cheap company borrowed money going into the stock "market"
Price-Equity ratios are at an all time standard deviation of the mode.
"if investor appetite for such assets wanes."
What, you don't want to hold the equites anymore, Janet?
Darth Siddious?
deleted
Smokin' cigarettes and watchin' Captain Kangaroo
Now don't tell me, "I've nothing to do"
https://www.youtube.com/watch?v=1s8nRL2bPCU
"Our free money policies of 73 months and counting are causing all sorts of bubbles that may pop. If they do, well, we may have to extend our free money policies even longer. As our intellectual leader Paul Krugman has said, the best way to deal with a bubble is to cause another bubble"
It will get so bad, that the USD will be worthless and people will be begging the bankers to fix it - please do whatever it takes to save us, so to the rescue will be the new 'global' currency to replace it and extend the ponzi another couple generations.
In terms of debt capital markets, here are some details.
February 5th, 2015
January 30-Year Spread Highest Since 2009
By Dennis K. Chung of Dealogic
In terms of Oil and Gas tranches, here are some details.
January 27th, 2015
$72.2bn in Global Oil & Gas Bonds Due to Mature in 2015
By Takaedza Mutambiranwa of Dealogic
So look out 2015Q2.
In terms of Commercial Real Estate prices and change, take a look at this chart.
http://gerdaumarketupdate.com/storage/marketplace/2015/jan/jan15/Fig.1.pdf
Thats fukin nutz
TYLER
You missed the biggest announcement in that press release.
Yellen let the cat out of the bag several days ago.
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
Here is how to prepare for the worst.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Thanks