Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Bernanke Exit, Yellen Entry - Federal Reserve Continuity of Committing Fraud

Politics / US Federal Reserve Bank Mar 24, 2014 - 10:44 AM GMT

By: Jas_Jain

Politics

There has been lot of commentary about the transition at the head of the Federal Reserve. During the past four months, Janet Yellen has appeared for confirmation hearing, testimony to the Congress, and a Q&A session following her first meeting as the Chairperson of the Fed.


Yellen, Bernanke and Greenspan on the Current Stock Market Valuation (Bubble or Not)

During her confirmation hearing, Yellen was asked about stock market being in bubble territory and her answer was that the market was fairly valued and was not a bubble. In a Q&A session following the meeting of American Economic Association in Philadelphia in January 2014, two weeks before his last FOMC meeting as the Chairman, Ben Bernanke was also asked about the stock market bubble and he said that the stock market valuation was within a historical norm. In early March, Greenspan appeared on CNBC and he was also asked about stock market being a bubble and he also said that the market was not over valued and was fairly valued.

Have any of the three most recent Chairpersons of the Federal Reserve looked at any of the data that assess market valuation in the historical context? Highly unlikely, because the best methods of market valuation clearly indicate that the stock market is grossly over-valued, historically, with valuation levels above 90 percentile. I will mention two of the best methods of market valuation, one of which, the Shiller Cyclically Adjusted P/E ratio (CAPE), was the basis of Greenspan's "irrational exuberance," comment in 1996 when CAPE reached the level above 25 that it has been during the past 4 months.

Greenspan and the Stock Market Bubbles

From the transcripts of a 1994 FOMC meeting we learn that back then Greenspan did believe in stock market bubbles and he commented that by raising the rates in 1994 the Fed might have burst the bubble in the stock market, towards the end of 1993, when the CAPE was just above 21, fueled by low Fed Funds rates. The stock market spent 1994 in a correction. After the "irrational exuberance" comment in late 1996, Greenspan stopped commenting on the market bubble and in 1999 even try to justify the valuation. He was correctly called the bubblemeister back then and he remains one today. After 1996, Greenspan learned that Wall Street doesn't look kindly at any Fed Chairperson who would confirm that there could probably be a bubble in the two most important asset markets, the stock market and the housing market. Since then asset bubbles have become a preferred mechanism of keep the economy growing and Federal Reserve has chosen to look the other way and allow the bubble to continue.

Congressional Testimonies of Fed Chairs and Questions About Bubbles

In March 2007, Bernanke was asked about the housing market being a bubble and not only he denied that there was any nationwide bubble he said that housing price rise would slowdown to 3-5% a year. Few short months later the historical housing bubble burst with a vengeance. I don't remember Congresspersons asking the Fed Chair a question about a bubble, in the stock market or the housing market, unless there was a real bubble. The same applies when there is lot of talk about a bubble on Bloomberg and CNBC. Both these indicators have confirmed that there must be a bubble in the stock market.

The "Buffet Indicator," i.e., the Stock Market to GDP Ratio

Another very good indicator of a bubble in the stock market is the stock market capitalization to the GDP ratio that some have labeled the "Buffet Indicator," because Buffet had mentioned that long-term there is a relationship between the GDP and its growth rate and the stock market and its growth rate. Below is the latest graph of this ratio. Both, this indicator and Shiller's CAPE, clearly indicate that the stock market over the past 3 months has been above 90th percentile and if we were to exclude the supper bubble period of 1998-2000, we are at 98th percentile.

The Buffett Indicator: Corporate Equities to GDP

To call this level of historical over-valuation, "historical norm," or "fairly valued," is a deliberate lie, intended to mislead the Congress and the public and constitutes fraud. They could have given a non-committal answer as to "we don't know," or even a more honest answer that Fed Chairs have a horrible record at identifying bubbles and that the Fed policy might have even contributed to them with artificially low rates.

Periodic Fraud by Wall Street and Economists, Including the Fed Chairs

As I had concluded earlier with the supporting evidence that Economists and Wall Street commit "periodic," or cyclical fraud, very predictably. At cyclical peaks they flat out lie about impending recessions. Their horrible record during 2007 speaks volumes. The same would prove to be the case in near future.

Lying about bubbles has become a required qualification for the job for the Federal Reserve Chairperson since 1997, after Greenspan uttered the famous phrase irrational exuberance. Had Greenspan continued to talk about the stock market bubble he would have lost his job by no reappointment after his 4-year term at that time. The Fed chairs, like most politicians, must serve their real masters -- Wall Street, large corporations and the super rich. The periodic fraud by Wall Street and the Fed has been largely responsible for the income and wealth inequality in America. Many other countries have followed the example set by the US.

By Jas Jain , Ph.D.

the Prophet of Doom and Gloom

Copyright © 2014 Jas Jain - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules