# Great news! Fed says there is no stock bubble



## james4beach (Nov 15, 2012)

I breathed a sigh of relief when Yellen, incoming Federal Reserve chief, reassured everyone that there is no bubble. What a relief !!

Janet Yellen: No Equity Bubble, No Real Estate Bubble, And No QE Taper Yet

I'm being sarcastic by the way; what else would you expect from a person whose job is to pump assets higher?


----------



## GoldStone (Mar 6, 2011)

Oh look! J4B starts another of his trademark bubble-fetish threads. What a relief!

We have a bubble in bubble threads.


----------



## My Own Advisor (Sep 24, 2012)

Yell-en is right


----------



## WillyA (Apr 14, 2011)

There is usually no bubble until everything starts to crash and then the analysts start to fall over each other on tv saying how they were right and how everyone got greedy again


----------



## james4beach (Nov 15, 2012)

No goldstone didn't you see the article? There isn't a bubble, everything is fine.

Please leverage up on stocks. _Please_.


----------



## yyz (Aug 11, 2013)

James really,
We all get that you:
Hate stocks
Believe there is a conspiracy against you
The stock market will take all your money

And yet you still continue in different area of these forums cry the sky is falling or is about to.

We get it,we really do.So please just stick your money in Bonds, GIC's and HISA and save us listening to your daily (hourly) doomsday preaching.Start a website like www.GIC4me.com or www.INBONDSWETRUST.com I'm sure you'll get some followers


----------



## james4beach (Nov 15, 2012)

yyz, what are you, nuts? I keep posting that half my investable money is in stocks. There's no conspiracy, they're not out to get me.

But the Federal Reserve has created a significant bubble in several assets, and I think it's created some unique risks we should all be aware of.


----------



## james4beach (Nov 15, 2012)

yyz: this is not a stock forum. It's an *investment* forum. Investing means balancing risk versus reward, allocating capital well, for different asset classes.

When I post here I talk about stocks, bonds, cash, fixed income, and the general economy.

What are _you_ contributing about non-stock topics?


----------



## andrewf (Mar 1, 2010)

james, it's very difficult to forecast short term returns. I agree with Yellen that the US stock market is not currently in a bubble. It is merely expensive, not irrationally exuberant like you see in bubbles. I expect there to be a good sized pullback in the next few years, but then again, that's pretty much always the case.


----------



## fatcat (Nov 11, 2009)

where is the asset bubble james ?
as near as i can tell most of the world is still teetering on the edge of deflation which still presents the greatest risk ...
in the last 24 hours there have been stories about the food wars in canada where retailers are cutting to the bone to stay ahead of competition
wal-mart is talking about a lousy christmas
the fed is worried about deflation


----------



## yyz (Aug 11, 2013)

Yea I'm nuts

Here are some of your quotes from Nov 5 let me know if you'd like more



"Total asset view, I'm 89% in cash/GIC/bonds/savings but a chunk of that is capital segregated for business & real estate"

"Perhaps when you hear "investing" you think it must mean stocks. I did dabble a bit in stocks, both long and short, but my investments have been mostly fixed income (as they still are today). I gave you the breakdown of my current exposure."

"I can't bring myself to invest in stocks because I feel that I'm not really investing in companies, but really, I'm investing in faith in the central banks.

So I'd like to wait until the emergency measures are over. Maybe this means I wait 5 years... fine, I guess I'll have to."


----------



## james4beach (Nov 15, 2012)

See this is *exactly* how people like yyz like to misrepresent what I have written, skew facts, to try to make me look bad. Why people are so keen on making me look bad, I have no idea...

yyz is referencing this post of mine. Click to see the original post
http://canadianmoneyforum.com/showt...gonna-get-ugly?p=205266&viewfull=1#post205266

So here is the full text. Notice he only copied and pasted the first line, not the second



> Total asset view, I'm 89% in cash/GIC/bonds/savings but a chunk of that is capital segregated for business & real estate
> 
> Looking at available (investable) money, I'm 48% in fixed income and *52% in equities & precious metals. More or less a 'balanced fund' *


----------



## james4beach (Nov 15, 2012)

fatcat said:


> where is the asset bubble james ?
> as near as i can tell most of the world is still teetering on the edge of deflation which still presents the greatest risk ...
> in the last 24 hours there have been stories about the food wars in canada where retailers are cutting to the bone to stay ahead of competition
> wal-mart is talking about a lousy christmas
> the fed is worried about deflation


To me it looks like the bubble is in American stocks, all bonds, and real estate. I mean they are explicitly buying billions in bonds every month, and the S&P 500 directly correlates with the Federal reserve balance sheet. It's not like I'm talking abstract concepts here, all the charts show the amazing correlation

I agree the Fed is worried about deflation though, they're certainly worried about it


----------



## GoldStone (Mar 6, 2011)

Do you have anything new to say on this subject??

We just finished an exhaustive 18 page thread of yours. Why start another one on the very same subject?

You get a backlash because you are repetitive in the extreme, to the point of being obnoxious. Nothing to do with your bearish stance.


----------



## HaroldCrump (Jun 10, 2009)

IMHO, there is merit to both the asset bubbles theory as well as the deflation theory (presented by fatcat above).

There is deflation because, fundamentally, we are in a depression.
We have been in a depression since 2008, although no one is using the D word.
This is the same type of depression as the 1929 - 1937 one.

The only reason we do not _see_ the deflation in the CPI (a bogus number) is because of Q/E (I, II, III to infinity).

Central banks around the world are fighting deflation by ZIRP and Q/E to create artificial inflation.

Ref. asset bubbles, there are indeed specific asset bubbles in specific areas, sectors, and parts of the world.
There is a R/E bubble in China (esp. the Eastern coast) and India.
There are R/E bubbles in Vancouver and Toronto, if not in other parts of Canada.

IMHO, what we are seeing since 2009 is several mini asset bubbles popping up and exploding in different parts of the world, every now and then.
None of them is, thankfully, as big as the mother-of-all US R/E bubble that occurred from 2005 - 2007.
These are like a game of Whac-a-Mole - relatively short term bubbles popping up and then deflating.

Every country is in a race to create inflation with the hope of getting them out of depression.


----------



## Janus (Oct 23, 2013)

GoldStone said:


> Do you have anything new to say on this subject??
> 
> We just finished an exhaustive 18 page thread of yours. Why start another one on the very same subject?
> 
> *You get a backlash because you are repetitive in the extreme, to the point of being obnoxious. *Nothing to do with your bearish stance.


I think you meant exhaustING.

Bolded emphasis mine - I think you hit the nail on the head. James, your bearish concerns in themselves are neither annoying nor strictly wrong (though your insistence on GICs returning more than stocks is an exception).


----------



## alingva (Aug 17, 2013)

_I can only say: I'm sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed's first plunge into the bond-buying experiment known as quantitative easing._

We were working feverishly to preserve the impression that the Fed knew what it was doing.


----------



## james4beach (Nov 15, 2012)

GoldStone said:


> Do you have anything new to say on this subject??
> 
> We just finished an exhaustive 18 page thread of yours. Why start another one on the very same subject?
> 
> *You get a backlash because you are repetitive in the extreme, to the point of being obnoxious. Nothing to do with your bearish stance.*


OK point taken - I'll tone down my posting frequency.

The new contribution was exactly the content of my starting post, the link to the article in which Yellen says there is no bubble. I thought it was an important piece of news, because a Fed chief's unwillingness to acknowledge even the possibility of a bubble shows - to me - no commitment to be cautious, or to prevent a bubble from happening.


----------



## alingva (Aug 17, 2013)

james4beach said:


> To me it looks like the bubble is in American stocks, all bonds, and real estate.


 I am not sure about stocks (probably, you are right, when people are pushed out of bonds,precious metals and real estate to stocks - you can call it a bubble), but all the rest is absolutely BIG YES. Especially Can Real Estate in big cities. In Bubble We Trust


----------



## sags (May 15, 2010)

That is some article in the WSJ from the guy who ran the program.


----------



## alingva (Aug 17, 2013)

fatcat said:


> where is the asset bubble james ?
> as near as i can tell most of the world is still teetering on the edge of deflation which still presents the greatest risk ...
> deflation





> A bubble is an environment in which the market price of an asset has deviated from the underlying asset’s fundamentals to an extent that renders the current market price unstable relative to the underlying asset’s ability to deliver the expected result.


from http://pragcap.com/are-we-in-a-stock-market-bubble (a very good financial blog)


----------



## Causalien (Apr 4, 2009)

Even though I am 100% invested in US stocks, I was hoping they'd taper this October. Which means that I did the right thing by buying stocks and hence shorting USD.

Now because of non taper... and I am guessing that there won't be taper for another year, I am going to diversify my cash out of USD and any currency that is somewhat pegged to it. Including CDN's 50% peg to USD. The dialogue has significantly changed. Most industrial production has fallen, it is not the recovery that we hoped for and I am getting the feeling that QE will continue and hyperinflation is now a possibility. Heck, USA defaulting on bonds is now a possibility because the treasury now owns half of all bonds.


----------



## fatcat (Nov 11, 2009)

> Total asset view, I'm 89% in cash/GIC/bonds/savings but a chunk of that is capital segregated for business & real estate
> 
> Looking at available (investable) money, I'm 48% in fixed income and 52% in equities & precious metals. More or less a 'balanced fund'


james, i didn't sleep well last night, i am one coffee short of full functioning ... please explain what you mean by this, i honestly don't understand 

are you saying that 89% of total assets is in cash/bonds/savings and the rest (11%) is split between fixed income and equities ?

so you have roughly 6% of your total assets in the stock market, do i have that right ?

if not, please tell me what percentage of your investable _total_ assets is in equities/stocks ? (leaving your personal real estate out of the equation)


----------



## james4beach (Nov 15, 2012)

fatcat said:


> james, i didn't sleep well last night, i am one coffee short of full functioning ... please explain what you mean by this, i honestly don't understand
> 
> are you saying that 89% of total assets is in cash/bonds/savings and the rest (11%) is split between fixed income and equities ?
> 
> so you have roughly 6% of your total assets in the stock market, do i have that right ?


Hi fatcat. Let me try to explain what I meant:

Say you put all my assets on one giant ledger, one big pile of money. 89% of total assets is in "cash, GICs, bonds, high interest savings, aka fixed income". The rest, 11% is in equities. Of my total assets, 11% in equities.

That's if you look at my assets like one big pile of money. But I have a chunk out of that pile, that I put in separate account and keep liquid for upcoming needs: imminent business capital/real estate purchases or both. Either way that money is "segregated".

That leaves me with a smaller pile of investable money. This is money that isn't segregated for special purposes and is available for anything I want. This is my "investable" money and for all intents and purposes _is the only personal money I have available._

That investable money is divided 48% fixed income, and 52% equities.



> if not, please tell me what percentage of your investable total assets is in equities/stocks ? (leaving your personal real estate out of the equation)


I have 52% of my investable total assets in equities


----------



## dogcom (May 23, 2009)

Causalien said:


> Even though I am 100% invested in US stocks, I was hoping they'd taper this October. Which means that I did the right thing by buying stocks and hence shorting USD.
> 
> Now because of non taper... and I am guessing that there won't be taper for another year, I am going to diversify my cash out of USD and any currency that is somewhat pegged to it. Including CDN's 50% peg to USD. The dialogue has significantly changed. Most industrial production has fallen, it is not the recovery that we hoped for and I am getting the feeling that QE will continue and hyperinflation is now a possibility. Heck, USA defaulting on bonds is now a possibility because the treasury now owns half of all bonds.


Causalien the Fed can't taper unless the bond market says it can. Just look at what happened over the summer when they put out the threat of tapering. The bond market replied and basically said try this and your house of cards will come crashing down. Of course the Fed listened and instead just kept up the jawboning with the help of the mainstream media and continue to do so to this day.


----------



## Causalien (Apr 4, 2009)

dogcom said:


> Causalien the Fed can't taper unless the bond market says it can. Just look at what happened over the summer when they put out the threat of tapering. The bond market replied and basically said try this and your house of cards will come crashing down. Of course the Fed listened and instead just kept up the jawboning with the help of the mainstream media and continue to do so to this day.


The big giant bond market spookyman. The Fed understimated the bond market it seems. Either way, they are now locked in to QEinfinity. 
The reason why I don't think the stock market is a bubble but look at it as a "Short USD" is because both bond price and the stock market are going up. Usually, they counter balance each other, and if bonds were to sell off and stock go up, I'd say it's a bubble. 

If the fed doesn't own 50% of the us treasury, I doubt they'd gulped this hard when the bond market said no.


----------

