Yellen Testimony Concerning Whether Stocks Are Experiencing A Bubble

I found various of Janet Yellen’s comments during her confirmation hearing on Thursday (November 14) to be notable, although I don’t agree with many of them.

For reference purposes, here are a few of the comments.  Unfortunately, the official transcript is not yet available.  The following excerpts are from the Wall Street Journal post of November 14, 2013, titled “Yellen on Stocks:  This Isn’t a Bubble.”

“Stock prices have risen pretty robustly,” she told lawmakers Thursday. But looking at several valuation measures — she specifically cited equity-risk premiums — she said: “you would not see stock prices in territory that suggest…bubble-like conditions.”


“At this stage, I don’t see risks to financial stability” from current policies, she says, while noting limited evidence of “reach for yield” among investors or a buildup of leverage.

She says it’s important for the Fed to “attempt to detect asset bubbles.” For now, however, she doesn’t see any bubbles that need to be popped.

Another source is the Bloomberg article of November 14 titled “Yellen Signals Continued QE Undeterred by Bubble Risk.”  Here is an excerpt, slightly different than that seen above:

“Stock prices have risen pretty robustly but if you look at traditional measures,” such as price-earnings ratios, “you would not see stock prices in territory that suggests bubble-like conditions,” she said.


The Special Note summarizes my overall thoughts about our economic situation

SPX at 1798.96 as this post is written