The Stock Market Bubble is So Big Even the Fed's Talking About It

The Fed confirmed yesterday that stocks are in a bubble.

Lost amidst the usual Fed-speak about inflation and other items were the following nuggets.

1)   “Equities” (read: stocks) were the primary reason the Fed discussed financial stability risks.

2)   The Fed raised its assessment of financial stability from “notable” to “elevated.”

3)   The Fed discussed “stock valuations.”

This is simply incredible. Remember, we're talking about the Fed here... a group of people who go above and beyond to ignore risks in order to maintain the status quo.

Put another way, the  stock market bubble is now so massive that even THE FED is talking about it. Indeed, the Fed is even openly states that the bubble might cause financial instability (read: a CRASH).

It’s not difficult to see what the Fed is talking about. Based on their cyclical adjusted price to earnings ratio (CAPE) stocks are in CLEAR bubble territory.

As you can see, stocks are currently as overpriced as they were at the 1929 peak. Indeed, the only time stocks were MORE expensive was the Tech Bubble: the single largest stock market bubble in history.

They say you don't ring a bell at the top. But what the Fed did yesterday is DARN close.

So what happens when the markets wake up to the fact that yet another massive  bubble is beginning to burst?

You've been warned.

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Stef1304 Fri, 08/18/2017 - 05:55 Permalink

Does this means, that Fed is starting to prepare itself/us for that so-called "bubble" to blow up ?  In any case, it is interesting to see how this media frenzy (anti-trump/anti US history) is getting higher and higher, while the market is getting closer and closer to breaking down ?I wonder how far those 2 are inter-connected ? And, if this 2 are really inter-connected, how this inter-connection works ? Is it just coincidence (based on similar dead line) ? A involontary resonance ? A pure player similar anticipation ? Something else ?  

Kidbuck Fri, 08/18/2017 - 06:40 Permalink

Trump, to his detriment, has not only embraced this bubble but claimed credit for it. What kind of idiot takes credit for the fed robbing everyone but banksters of their purchasing power?

Money_for_Nothing Kidbuck Fri, 08/18/2017 - 07:03 Permalink

Trump told everyone they should sell. If the bubble bursts that clip will be rolled out. I'm not sure the bubble will burst because too many people have a vested interest in pretending.

My point. Trump is like the baby doctor before ultrasounds who wrote down girl in his notebook while telling the mother-to-be she would have a little boy. If the baby was a girl he would show the mother the entry in the notebook.

Tails Trump wins. Heads Trump wins.

In reply to by Kidbuck

Money_for_Nothing Fri, 08/18/2017 - 06:56 Permalink

Michael Pettis (do an internet search if you want his credentials) has shown convincingly that any country that wants to run a trade surplus must buy US Dollar denominated financial paper. Otherwise their customers end up with a dollar shortage. Petrodollar trade (do a search on that also if you want to know) doesn't supply enough dollars currently.

My point. If Trump and Congress get in a pissing war about raising the debt ceiling then any dollar denominated financial asset is going to go much higher until they resolve their differences. Could be 40+ billion dollars a month more.

That is why the primary dealers are trying to buy up stocks right now. To sell them to China when the crunch hits.

jmack Money_for_Nothing Fri, 08/18/2017 - 07:22 Permalink

    The debt ceiling dance will be crucial.  But it will not be intuitive.  much of the politics right now is to subdue Trump so they can get the debt ceiling deal they want.  So if Trump can muster a fight with support in congress, it will look very bad during the fight, but if he wins concessions, it may actually give us a stronger dollar going forward.  If his poiitcal capital is such that he cannot muster a fight, and congress gets an over done debt ceiling deal, it will mean less volatility in the dollar during the fight, but medium to long term a much weaker dollar, depending on how egregious the deal is.

In reply to by Money_for_Nothing

NobodyNowhere Fri, 08/18/2017 - 07:57 Permalink

The owners of the Fed are the onex who have created this bubble and they will keep it going and they will decide the timing of the crash.All this song/dance (and narrative like the MSM or even this article) is so the stupid Americans think that the banksters are the victim too.