• Fed Fallout Escalates: China Bond Market Crashes Most On Record, Yuan Plunges

  After a bubblicious surge higher over the last few months (as China's hot money swishes from one trending-higher market to another), China's bond market is collapsing. As Chinese money-markets tighten into new year, yuan weakens, and capital outflows accelerate, so it appears the final bastion of safety has cracked. Chinese bond futures crashed overnight by the most on record, erasing in a week the gains of the last 18 months.

  The rally began in 2014, buoyed by slowing economic growth and a monetary-easing cycle that kicked off in November that year. Now that is over…

  

   

  As Chinese liquidity pressures ripple up from the short-term repo markets…

  

   

  Offshore Yuan has tumbled 5 handles since The Fed raised rates…

  

   

  And Japanese stocks cannot hold a bid despite the weaker yen.

  It appears Janet's message about Trump's fiscal plan is starting to sink in.

  

  

• Celebrities Unite to Ask Electors to Vote Against Trump on December 19th

  The fuckery is indeed very real.

  The fervor and energetic effort into preventing Trump from taking the Presidency, has taken on new levels of lunacy by the left — who are absurdly panicked and beguiled by paranoia to the point of making themselves into carnivale clown jackasses — all but assuring the reelection of Trump in 2020 and the Silver Fox in 2024.

  Springboarding off the hysterical media and their Russian fairytales of election tampering and raging Putin vendettas, a new organization has appeared — seemingly out of nowhere. They call themselves United For America and they are cucks.

  Here is their mission statement.

  

  According to their Whois data, the website was launched shortly after Thanksgiving, suggestive that plans to deny Trump the Presidency has been in motion for at least three weeks.

  

  Here is their sparsely followed Twitter account — again indicative of their irrelevancy and newness to the 2016 elections.

  

  And here is their video, a plea for help from the electors — practically begging them to ignore the will of the people and to vote against Trump on 12/19, saying they’d make history doing so and would be considered heroes for ‘voting their conscience’, somehow suggesting that the electors don’t really want to vote for Trump — but only do so because he won the god damned elections.

  This video shall forever immortalize the emotional collapse of the left — bedraggled snowflakes, crestfallen, deep in a stupor of their own making.

  Acceptance is the final stage of grief, something the illiberal left will soon be forced to endure — whether they want to or not.

   

  Content originally generated at iBankCoin.com

  

• Jill Stein Spends $1mm Of Recount Donations On "Staff, Admin and Consultants"

  After promising to spend “every dollar” of the donations she raised from disaffected Hillary supporters on recount efforts, Jill Stein has just released the following budget which reveals that over $1mm (or nearly 15% of the total $7.3mm raised) was used to fund her “staff payroll,” “consultants,” “administrative expenses,” and “compliance costs.”  This looks eerily similar to some Clinton Foundation budgets we recently reviewed which claimed to have spent “every dollar” of their donations on “charity work.”

  

   

  Of course, to add insult to injury, Stein’s efforts in Wisconsin actually widened Trump’s margin of victory while recount efforts in Michigan and Pennsylvania were shut down by courts based on merit.  Therefore, given that Wisconsin’s net votes changed by a grand total of 131, Stein effectively paid $56,759 for each changed vote.  

  And while that may sound like a complete failure to most of us, Stein, in a press release posted to her website, was a bit more upbeat describing the recounts as a “resounding success.”

  “Thanks to over 161,000 donors and support from more than 10,000 volunteers, this historic recount pushed forward in three states, defying every political blocking tactic and clearing every bureaucratic and financial hurdle,” said Dr. Jill Stein, 2016 Green Party candidate for president. “It was an amazing affirmation of the power of the American people to have a voice in their voting system and demand elections with integrity. By revealing serious problems about our voting systems, out of date laws and recount procedures in three states, these recounts were a resounding success. Our efforts have shined a light on the urgent need for reforms to our electoral system, to election laws and to recount procedures. We look forward to continuing our work to make those reforms a reality. The fight for civil and constitutional rights of all Americans goes on today – stronger than ever before.”

  So congrats on the “resounding success” young Hillary voters!  You spent $7.3mm to widen Trump’s margin of victory and didn’t even “get a lousy hat.”

  
  

  

  

• Former UK Ambassador Says Source Of Clinton Emails Was "Disgusted" Democratic Whistleblower

  Just as the CIA/Democrat/Mainstream Media narrative of Russia's involvement in the election jumps the shark with fact-less accusations of Putin's personal involvement, The Daily Mail blows the entire 'hack' meme out of the water. As an evoy for Wikileaks, former UK ambassador Craig Murray claims he flew to Washington for a clandestine handoff with one source, who "had legal access to the information. The documents came from inside leaks, not hacks… Neither of [the leaks] came from the Russians."

  

  Murray, who blasted The CIA's "blatant lies" in a recent op-ed, has now come forward with more details on how he knows they are lying… (as The Daily Mail reports)

  Craig Murray, former British ambassador to Uzbekistan and a close associate of Wikileaks founder Julian Assange, told Dailymail.com that he flew to Washington, D.C. for a clandestine hand-off with one of the email sources in September.

   

  'Neither of [the leaks] came from the Russians,' said Murray in an interview with Dailymail.com on Tuesday. 'The source had legal access to the information. The documents came from inside leaks, not hacks.'

  While Murray is a controversial figure who was removed from his post as a British ambassador amid allegations of misconduct. He was cleared of those but left the diplomatic service in acrimony. His links to Wikileaks are well known.

  His account contradicts directly the version of how thousands of Democratic emails were published before the election being advanced by U.S. intelligence.

  Murray insisted that the DNC and Podesta emails published by Wikileaks did not come from the Russians, and were given to the whistleblowing group by Americans who had authorized access to the information.

   

  'Neither of [the leaks] came from the Russians,'  Murray said. 'The source had legal access to the information. The documents came from inside leaks, not hacks.'

   

  He said the leakers were motivated by 'disgust at the corruption of the Clinton Foundation and the tilting of the primary election playing field against Bernie Sanders.'

   

  Murray said he retrieved the package from a source during a clandestine meeting in a wooded area near American University, in northwest D.C. He said the individual he met with was not the original person who obtained the information, but an intermediary.

   

  

  His account cannot be independently verified but is in line with previous statements by Wikileaks – which was the organization that published the Podesta and DNC emails.

  Murray declined to say where the sources worked and how they had access to the information, to shield their identities.

   

  He suggested that Podesta's emails might be 'of legitimate interest to the security services' in the U.S., due to his communications with Saudi Arabia lobbyists and foreign officials.

   

  Murray said he was speaking out due to claims from intelligence officials that Wikileaks was given the documents by Russian hackers as part of an effort to help Donald Trump win the U.S. presidential election.

   

  'I don't understand why the CIA would say the information came from Russian hackers when they must know that isn't true,' he said. 'Regardless of whether the Russians hacked into the DNC, the documents Wikileaks published did not come from that.'

  Assange has similarly disputed that charges that Wikileaks received the leaked emails from Russian sources.

  'The Clinton camp has been able to project a neo-McCarthyist hysteria that Russia is responsible for everything,' Assange told John Pilger during an interview in November.

   

  'Hillary Clinton has stated multiple times, falsely, that 17 US intelligence agencies had assessed that Russia was the source of our publications. That's false – we can say that the Russian government is not the source.'

  As Murray concluded in his recent op-ed, the continued ability of the mainstream media to claim the leaks lost Clinton the election because of “Russia”, while still never acknowledging the truths the leaks reveal, is Kafkaesque.

  It is terrible that the prime conduit for this paranoid nonsense is a once great newspaper, the Washington Post, which far from investigating executive power, now is a sounding board for totally evidence free anonymous source briefing of utter bullshit from the executive.

  The worst thing about all this is that it is aimed at promoting further conflict with Russia. This puts everyone in danger for the sake of more profits for the arms and security industries – including of course bigger budgets for the CIA. As thankfully the four year agony of Aleppo comes swiftly to a close today, the Saudi and US armed and trained ISIS forces counter by moving to retake Palmyra. This game kills people, on a massive scale, and goes on and on.

  

  

• Report: House Intelligence Committee Abruptly Cancels Briefing After CIA Declined to Attend

  The current hysteria over Russian interference doesn’t infer that they hacked the voting itself, but instead made available true information about the Hillary Clinton campaign, by way of Wikileaks, which then swayed public opinion to vote in favor of Trump. In other words, Podesta, Clinton and their media shills are still corrupt bastards, beholden to Saudi Arabia and China — but had the American people never learned about it via the Wikileaks, well then, they might’ve voted for her instead of Trump.

  In a nut shell, that’s the democrat argument for fomenting war against Russia and to overturn the will of the people. Again, no one is questioning the validity of the votes, but the souls of men and how they felt after reading the Wikileaks.

  Fox News is reporting the House Committee has abruptly canceled a briefing scheduled for tomorrow — due to the CIA not making anyone available to attend. As of now, the CIA is refusing to comment on the matter, until their full assessment of the situation is made available to President Obama before 1/20/17.

  Source: Fox

  The House Intelligence Committee abruptly canceled a briefing set for Thursday on alleged Russian interference in the U.S. election, after the CIA declined to provide a briefer for the session, Fox News is told.

  Amid concerns about reports that conflict with details previously provided to the committee, Chairman Devin Nunes, R-Calif., had requested a closed, classified briefing Thursday for committee Republican and Democratic members from the FBI, CIA, Office of the Director of National Intelligence and National Security Agency.

  But Fox News is told the CIA declined citing its focus on the full review requested by President Obama, and the other agencies did not respond to the committee’s request, which is unusual given the panel is the most-senior committee with jurisdiction.

  “It is unacceptable that the Intelligence Community directors would not fulfill the House Intelligence Committee’s request to be briefed tomorrow on the cyber-attacks that occurred during the presidential campaign,” Nunes said in a statement. “The Committee is deeply concerned that intransigence in sharing intelligence with Congress can enable the manipulation of intelligence for political purposes.”

  “Last week, the President ordered a full Intelligence Community review of foreign efforts to influence recent Presidential elections – from 2008 to present,” the statement added. “Once the review is complete in the coming weeks, the Intelligence Community stands ready to brief Congress—and will make those findings available to the public consistent with protecting intelligence sources and methods. We will not offer any comment until the review is complete.”

  Separately, Fox News has learned additional details about the “full review” President Obama ordered from his intelligence agencies regarding Russian interference.

  The review is being led by the Office of the Director of National Intelligence, and is a multi-agency effort. Investigators plan to take existing intelligence and reconstruct what happened.

  Fox News is told one focus is on whether there is new intelligence that substantiates analysis the interference was designed to ensure a Trump victory, or whether a review of the existing intelligence with “fresh eyes” leads to new conclusions.

  Some lawmakers, on both sides of the aisle, have backed calls for a separate congressional investigation, voicing concern that Obama’s intelligence agencies might not be able to conduct a thorough review before he leaves office.

  Given statements from the White House, Fox News is told there is considerable pressure on the intelligence community to declassify as much of the findings as possible before Jan. 20, when Trump is set to take the oath of office.

  As of yesterday, 55 electors are asking for information regarding the Russian scare and if Trump knew anything about it. What the fuck?

  The Electors require to know from the intelligence community whether there are ongoing investigations into ties between Donald Trump, his campaign or associates, and Russian government interference in the election, the scope of those investigations, how far those investigations may have reached, and who was involved in those investigations. We further require a briefing on all investigative findings, as these matters directly impact the core factors in our deliberations of whether Mr. Trump is fit to serve as President of the United States.

  Judging by libtards comments like the one featured below, there are many on the left who believe the election result isn’t conclusive.

  Thoughts? The electoral college is scheduled to vote on December 19th.

   

  Content originally generated at iBankCoin.com

  

• The Conspiracy To Shut Down Truth, Donald Trump, & The American People

  Authored by Paul Craig Roberts,

  There is circumstantial evidence that the Washington Post, the New York Times, and the rest of the presstitute media are part of a conspiracy with the oligarchs, the military/security complex, the Hillary Democrats, and neoconized Republicans to shut down the dissident Internet alternative media and to deny Donald Trump the presidency.

  Consider the brand new website PropOrNot and its fake news list of 200 Internet Russian agents. PropOrNot is a website hidden behind multiple screens as would be an offshore tax avoidance scheme. In other words, no known, responsible entity is behind the site, which has libeled 200 other websites, or if it is, it is too ashamed of what it is doing to be associated with it publicly.

  Consider the expertise and money required to shield the identity of an organization, whether tax avoidance or website. This is not something that just anyone can do. This type of Klingon cloaking requires real money or the CIA.

  As long as it pretends to be a newspaper, the Washington Post is subject to journalistic ethics. But the PropOrNot story by Craig Timberg violated journalistic ethics. Unsupported accusations were leveled against 200 websites, a McCarthyism record.

  How did a story, which would have been instantly quashed by editors in my day as a Wall Street Journal editor get past Timberg’s editor?

  That is the question.

  Here we have the Post committing libel against 200 websites, all of whom can sue for damages. There go Bezos’ billions.

  Would a Washington Post editor of any intelligence have published such a libel-inviting story unless the owner, Bezos, gave the OK or the order?

  How can the Washington Post feel secure in an act of libel?

  Is it because Bezos is protected by his reported membership on a US government committee, along with the Google CEO, that is believed to conspire against the privacy of the American people?

  PropOrNot would have amounted to nothing except for the Washington Post. Craig Timberg’s story was written as if PropOrNot was the real goods. Yet, Timberg does not reveal who is behind PropOrNot.

  Add to this picture the hyping by the Washington Post, New York Times, and TV presstitutes of the unattributed CIA charge that Russia hacked the Hillary emails and used them to elect Trump with the help of Russian agent websites. This fake news charge is challenged by Wikileaks and by a number of experts who asked why unattributed allegations are accepted in the place of evidence, and the charge is not supported by the FBI. How do we know that the alleged unattributed CIA charges are actually made by the CIA or whether there is consensus within the agency?

  How can the presstitutes, such as the NYT and Washington Post give us all these claims without a shred of evidence or any attribution to the CIA officials allegedly reporting the story? What kind of journalism is this?

  The conspiracy against truth and against president-elect Trump is real. The oligarchs and their presstitutes, rogue elements of the CIA and the neocon establishment hope to drag alternative media before McCarthyite congressional hearings run by the American hegemonists who want power over the world.

  Whatever you think of Trump, clearly the oligarchs who rule us fear him. The oligarchs are trying to keep Trump out of the presidency, and they are trying to associate truthful reporting with foreign influence.

  Who wins this war determines the fate of America.

  

  

• Will Today's Selloff Continue: According To RBC, Here Is One Way To Find Out

  Having hit it out of the park recently with several fantastic cross-asset pieces, including “RBC Warns January Is Setting Up As A “Massive Mean-Reversion” Month” and “RBC Answers “THE” Question Every Investor Is Asking: “What Could Derail This Rally?””, today in the aftermath of the FOMC’s press conference, RBC’s cross-asset head Charlie McElligott is out with another must read report, explaining why we find outselves at a “dangerous fork in the road.”

  But before we present it to readers, a more topical point touched on by McElligott is how to determine what happens to markets tomorrow, specifically: whether today’s selloff will continue.  His answer:

  It’s likely that the very potent mix of higher $/Y and hits being taken in UST portfolios should induce further UST pressure from that specific audience. Sidenote:If they sell the Nikkei tonight despite the enormous weakening in yen today…I’ll start turning rather nervous for risk assets.

  If Charlie is right, tomorrow is not shaping up to be a pretty day for risk assets, because in the early Japanese session, the Nikkei was indeed being sold…

  • JAPAN’S NIKKEI 225 FALLS 0.1% TO 19,225.24 AT MORNING CLOSE

  … even as the Yen retraced just a modest part of its massive intraday move today.

  

  * * *

  Here is the rest of RBC’s note:

  **SPECIAL REPORT**: A DANGEROUS FORK IN THE ROAD

  #HOTTAKE: Geez. 

  The initial post-Fed takeaway was the collective “uh oh” from the buyside which was forced to suddenly shift to a worldview that the Fed is now “behind the curve,” with three hikes seemingly to come in ’17 (up from 2 in Sept projection), and then three more in each of the following two years.  Off the back of this reassessment, the more troubling observation came in the form of the exponential move in “real rates”:

  

  A violent move to this extent in real rates and USD (BBDXY seeing a +2.6SD move on day) is pure “FINANCIAL TIGHTENING,” which of course “mucks-up” the plumbing of a global economy funded in Dollars.  This is not supportive of the “reflation trade.”  We need some +++ inflation data, stat. 

  Rates blew through 2.50 on their way to 2.57, and now markets are fixating on 2.75 as the next stop.  These new levels brought out convexity sellers / swaps payers from the mortgage universe, but there is also seemingly a willingness from the leveraged-crowd to let their shorts ride / further pay in swaps, as it continues to generate so much positive PNL.  Into year-end with ever-diminishing liquidity / bank balance sheet, it would support the case for this to run.  Feedback too from the overseas ‘real money’ crowd also indicates that this rates-move can continue to run, as they won’t be buyers with yields closing at new highs (and especially above the ‘round #’ 2.50 level).  It’s likely that the very potent mix of higher $/Y and hits being taken in UST portfolios should induce further UST pressure from that specific audience (sidenote: if they sell the Nikkei tonight despite the enormous weakening in yen today…I’ll start turning rather nervous for risk assets).

  The potentially good news is that generally-speaking, the risk-parity community has gone through a massive deleveraging of their bond / duration length over the recent move, so there might not be the same scale of ‘unemotional selling’ as we’ve gotten accustomed-to during prior episodes of rate volatility….while too the only modest move in VIX (just +3.7% because out of the money call vols were down roughly equivalent to the marginal move higher in OTM put vols, mitigating one another—H/T Jon Simon) won’t bring out the ‘risk-control’ / ‘vol target’ universe in forced / mechanical risk-based deleveraging either.  Incredibly, 15-, 30- and 50-day historic SPX vols all sit below 10 still.

  Stocks acted largely as one would expect on an asymmetrical rates move higher: bond proxies / ‘low vol’ / defensives were absolutely crushed on account of the escalation of the duration unwind:

  

  The REAL issue for us ‘secular reflationists’ is that the recent positioning-pivot ‘winners’—small caps, high beta cyclicals, ‘value’ factor—were also beaten-up along-side the rates sensitives.  And in nearly perfect fit with the “January Effect” quant factor reversal strategy scenario (where quants go long Q4 ‘losers’ against short Q4 ‘leaders’), the two key factor inputs (being 1- December outperformance of “momentum market neutral” and 2- “anti-beta market neutral”) that we are watching as indicators were both ‘signaling’ again, with the two strategies as the two best-performing components in my thematic monitor today (green box):

  

  Optimally I think if markets come in to rates ripping to new highs tomorrow morning in sloppy-fashion, risk markets could be in for something.  But if we are able to expose some UST buyers and keep a lid on the rates move, it would allow financials / banks to work tomorrow, and stocks could very well likely “stop the bleeding.”  Per the script I’ve been outlining, I think then we have to set-up for the January ‘mean reversion’ potential where bonds rally against stocks, which in theory would allow re-setting of bond shorts and equities longs into a still picking-up backdrop of inflation and global PMIs. 

  Now instead, we must downshift that assessment and wait to take in new information in the coming-days with regards to this now very disruptive introduction of “financial tightening” and the implications for risky-assets. 
   

  

  

• Trumponomics: Going for a Ride on the Trump Train

  The following article by David Haggith was published first on The Great Recession Blog:

  I’m afraid the Trump train is headed for a sharp economic curve that takes us further away from free-market capitalism. The US already pulled out of the free-market station a long time ago, but Trumponomics moves deeply into a “mixed economy,” an economy in which government funding and private funding are married. The bankster-baron confederation in the Trump cabinet is how business and government consumate their marriage.

  My pervious article about Trump’s cabinet lineup demonstrated a major economic shift forming in the presidential cabinet. This article explains what that shift means.

   

  How Trumponomics may radically change the US economy

   

  In Trumponomics, this is worked out by placing corporate giants in direct control over all the reins of government in order to make sure that government is compliant to corporate interests as an effective way of boosting the economy. Trump has stated that most of his infrastructure spending will come from private enterprise, and this confederation assures government funding and business funding align.

  While this union empowers rapid economic growth, the downside to Trumponomics is that a mixed economy easily sidetracks from its stimulus intentions to becoming the ultimate form of crony capitalism because government and industry become such intimate partners in development that you cannot tell where one begins and the other really ends. That entices a flow of money from public to private interests. The state risks becoming the weaker partner in this arrangement — a mere servant of corporate needs and wants — because those running the state have their former institutions, lifelong friends and their pocket books at heart.

  Purportedly, Trumponomics is for the economic betterment of the entire nation, which is accelerated by combining the strength of state and business as a team in a unified direction. (It worked well for Germany after World War I.) I believe the Donald intends it for the best; but another downside is that Government — instead of having purely regulatory roles (congress and the executive branch) and the judicial role — effectively subsidizes certain businesses in creating the projects that government wants to accomplish.

  Trump is proposing that government may, for example, pay half the cost of building a bridge while a private contractor pays the other half in exchange for owning the right to collect a toll at the bridge forever. A bridge can support a toll that will be profitable up to a certain cost of construction. Above that cost, no one will pay the toll. So, the government kicks in the full cost above what industry sees as leaving room for an acceptable margin of profit. Government also helps clear the hurdles for construction. That gets a lot more things done quickly, but at what risks?

  Trumponomics is a plan for petal-to-the-metal growth; but it leaves no one regulating businesses when business executives are placed in charge of all the regulatory agencies. Another pitfall is that government, instead of simply assuring a level playing field for all businesses, can slip into favoritism toward businesses that are highly regarded by the corporate executives who assume the government reins of power.

  Granted, the US hasn’t had a truly free market for decades. The Fed, which is corporately owned, already rigs the economy constantly by enticing banks to soak up government debt at practically no interest with its promises of buying the debt back from its member banks and by creating money that it gives freely to banks to invest in stocks.

  Trump, however, is moving the country further in the direction of a mixed economy. Instead of state ownership of the economy (communism), it is corporate ownership of the state by corporate control of state offices, potentially directing them to the opposite end from what those offices were originally created for as regulatory bodies.

  I’m not saying corporate leaders should never hold cabinet positions, but when the cabinet is stacked almost entirely in the direction of Trump placing his corporate cronies in power, it looks very problematic, whether they are truly cronies (as in friends) or just a clutch of high-power corporate colleagues.

   

  The early surprise effects of Trumponomics

   

  Trump is already boosting the economy, and he hasn’t even assumed office. His Wall-Street cabinet lineup and his enormous corporate tax gifts (See “Trump: Titan of Corporate Tax Cuts” and “Trump Tax Plan Turns the Donald into Trickle-Down King.”) coupled to his promise that the government will take out huge sums of debt to buy projects from corporate tycoons have all certainly goosed stock-market expectations. Investors now run long with hopes that Trump’s plans will further inflate the stock market bubble to all-time weather-balloon heights.

  Given how Trump railed against Wall Street in his campaign, it is ironic that Trumponomics has proven most outstanding for Wall Street where bank stocks have risen more than any other sector. Leading the leaders of the pack, Goldman Sachs has absolutely skyrocketed, up a massive 33% since Trump won the election earlier this month:

   

  

   

  The financial sector has taken off since the election, on the assumption that a Republican administration will foster a much more lenient regulatory environment than has been in place since the financial crisis…. In particular, Goldman Sachs — a previous employer of several key Trump advisers — has been on a tear…. Indeed, according to legendary trader Art Cashin, about one-third of the postelection increase in the Dow Jones Industrial Average came directly from Goldman Sachs’ performance. (Business Insider)

   

  Three of Trump’s key team members are former Goldman Sachs executives. Several others come from or own other major banks. To be sure, the Trump cabinet looks like a cabal of the world’s biggest bankers. It looks like a group you might find in Davos.

  This all builds a massive amount of steam to power economic growth (and, for that reason, it may be hard for Democrats to totally resist when confirmation time arrives, though they have manifold other reasons to object); but where does the Trump train end up?

  To what extent will the corporate interests that now saturate the Trump cabinet come to own government and use its potent economic fuel to power their own engines? Such massive economic changes certainly have the power to change my predicted 2016 schedule for the Epocalypse, made before anyone knew Trump would be the engineer of the nation’s new economic train — vastly different from Obama’s sputtering economy.

  That would be good, except I think the Trumponomics train arrives at the same station only with much more momentum as we power headlong into much greater government debt, crewed by a cabinet rife with conflicts of interest and enticements toward self-serving corporate corruption. We are either counting on the sterling reputation of the nation’s biggest bankers and oil barons to resist temptation or on Trump’s mighty ability to keep this rambunctious train on the rails and out of the swamps of corruption while running the locomotive at a head pressure greater than the engine’s normal operating capacity.

  Will we say at the end, “How the mighty have fallen?”

   

   

  

  Trumponomics ends in a train wreck if it doesn’t end before it even begins.

  

• Is Janet Yellen Concerned About "A Bubble In Stock Prices"? This Is Her Answer

  Three months ago, Janet Yellen was asked during the last FOMC press conference if she was “worried about bubbles in the economy because of our prolonged low interest rates?” Her 169-word response was the following:

  Yes. Of course we are worried that bubbles will form in the economy and we routinely monitor asset valuations, while nobody can know for sure what type of valuation represents a bubble, that’s only something one can tell in hindsight, we are monitoring these measures of valuation and commercial real estate valuations are high. Rents have moved up over time, but still valuations are high, relative to rents. And so it is something we’ve discussed. We called this out in our monetary report and in other presentations and we are, in our supervision with banks, and I indicated, we have issued supervisory guidance to make sure underwriting is strong on these loans and this is something that we’ve looked at in stress tests, the larger banks to see what would happen to their capital positions and to make sure that they hold sufficient capital. And of course, I think the soundness and state of the banking system has improved substantially, but of course we are focused on such things.

  Fast forward to today, when Yellen was served a variation of the same question – one which included mentions of both “bubble” and “irrational exuberance” – by a Fox Business reporter, who asked: “the Dow is about to hit 20,000. It’s up substantially since the election apparently on investor optimism about the potential impact of President-elect Trump’s policies on the economy and an approving economy. I wonder if you share that optimism, number one. And if not, are we seeing a bout of perhaps irrational exuberance right now or are you concerned at all about a bubble in equity prices that could create some financial instability in the economy?

  Her response:

  I don’t want to comment on the level of stock prices. They may have been boosted by expectations about tax policy, possible cuts in corporate tax rates that have been much discussed, or by expectations about growth, possible reductions in down side risk to the economy. But these are things that market participants are trying to view along with the likely paths of interest rates, and I think all of that factors in to movements in stock valuations. But I don’t want to offer a view as to whether they are appropriate.

  The reporter did not, however, give up and continued his questioning:

  On equity prices you talked about whether or not evaluations are still within historical ranges and norms. Is Dow 20,000 kind of within the historical norms, are you comfortable with that?

  To which, a frustrated Yellen responded:

  Rates of return in the stock market relative to – remember that the level of interest rates is low – and taking that into account. I believe it’s fair to say that they remain within normal ranges.

  So i) Yellen did not wwant to comment on whether stock prices are appropriate and ii) when pressed, she confirmed that yes, they are.

  Which is surprising, because over a year and a half ago, in May 2015, Yellen’s view was quite different. As Bloomberg reported at the time, Yellen – speaking at a Washington forum  – said that “I would highlight that equity-market valuations at this point generally are quite high,” She then added “they’re not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low, but there are potential dangers there.”

  How does the market valuation in  May 2015 compare to December 2016 from a forward PE multiple basis? Here is the answer:

  

   

  So since Janet appears confused, here is a quick primer from Bank of America laying out all the ways that stocks are currently overvalued. According to the 20 most popular metrics, the stock market is  currently overvalued based on 17 of them by as much as 76%.

  

   

  Don’t believe Bank of America? Here’s Goldman showing that as of November 28, the S&P is expensive based on most metrics. It is even more expensive as of today.

  

  So what is a trader to do: ignore the fundamentals and trust Yellen when she says that “it’s fair to say that valuations remain within normal ranges”, or open one’s eyes and watch as the world’s most overvalued “market” keeps grinding higher? We will know the answer as soon as the next BTFD opportunity presents itself.

  

  

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