Earlier in the week Janet Yellen proceeded to suggest something incredible
“Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.”
The above leads me to an abrupt conclusion. Janet Yellen is either a complete idiot who is way out of touch with reality or she is actually a mad genius trying to fool the entire planet.
The statement above would be more appropriate if we were sitting at a bottom of a valuation range or in the final stages of a crisis. For example, 1914 or 1949 or 1982. At that time stocks were selling at P/E ratios of 6-8 and even lower.
Quite the opposite is true today. We are sitting at all time high valuation levels. In last week's update I have argued.....
Downright Crazy Valuations:
When we look at today's valuations the picture is even scarier. Earlier in the week Shiller's P/E Ratio on the S&P has pushed above 30 (median 15-16) for the first time ever. Especially if we adjust for the lack of earnings in the index during the tech bubble.
Allow me to rephrase that. The stock market today is selling at the highest valuation level in human history. Higher than 1929, 1937, 1966, 1972, 1987, 2000 and 2007.
Most importantly, most of the stock market's gains since 2009 bottom came from multiple expansion, not economic/earnings growth. And that was mostly due to the FED pumping trillions of dollars into the economy in the form of zero interest rates and QE.
Everyone knows this.
Let me put it this way. While Janet Yellen claims that we operate in a much more stable system and that we will never see another Financial Crisis in our lifetime, the exact opposite is true.
The picture at the top of this article is rather accurate. Janet Yellen has created a massive bomb that is ready to go off at any point now. When it does, it will make the financial crisis of 2007-2009 look like child's play in comparison. And if history is any guide, the FED won't be able to do a single thing to stop it - they are nearly out of ammo.
So, unless Janet Yellen is getting ready to die from printing too much by the end of the year, her statement is an outright lie. In that case you decide if she is an outright delusional liar or much smarter than your average market bear.
Here is a much more detailed technical view on the subject matter. Strangely enough, they come to the same conclusion.
Ms. Yellen is wrong about the next financial crisis. The only question is the timing and magnitude of its occurrence?
Make no mistake, an absolute bloodbath in equity markets is steaming our way. The only remaining question is...... WHEN? If you would like to find out exactly when the sell-off will start, based on our mathematical and timing work, please CLICK HERE