The most powerful woman in the World is gently trying to deflate the US stock market by declaring the “possible existance” of asset bubbles, and when the Federal Reserve says something, the whole market follows the order
(original publishing date: 05-09-14)
Janet Yellen is awesome.
If you haven’t watched her speaking in public yet, we highly recommend to do that because it looks like the new Federal Reserve Chairwoman has this weird tendency to make big announcements to the World in a casual, offhand way, as if she were simply talking about the weather.
During her first press conference as the post powerful woman in the World, Janet Yellen made a naive mistake, do you remember what she answered to the question of a journalist about short-term monetary policy ?
Journalist: Once you do wind down bond buying program, could you tell us how long of a gap we might expect before the rate hikes do begin?
Janet Yellen: So the language that we used in the statement is considerable period. So I, you know, this is the kind of term it’s hard to define. But, you know, probably means something on the order of around six months, that type of thing
Now, this was just a mistake, we really don’t think that the Federal Reserve will raise rates within less than one or two years, but the first reaction of the market was very predictable: sell !
Yesterday Yellen did it again: she somehow admitted the existance of a small-cap bubble in the US stock market. We are sure that the infamous “six months” announcement was a mistake coming from inexperience, but this time it may be different, here’s how she decided to drop the bomb:
Yellen repeats that stock values are in “historically normal ranges”
“There are pockets where we can potentially see mis-valuations,” Yellen said in response to questions after speech to Joint Economic Committee
Still, there’s no sign “we are obviously in bubble territory”
Panic selling on small-cap’s assets in 3…2…1:
Now repeat: the Fed is always right.