"Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"
Alan Greenspan
December 5, 1996
"Equity valuations of smaller firms, as well as social media and biotechnology firms, appear to be stretched."
-Janet Yellen
In an awkward attempt to placate detractors that feel like the stock market has rallied too far, too fast, Janet Yellen threw two of the most volatile sectors in the stock market under the bus. It was almost surreal. But it happened. However, will it work?
Sure, biotech and social media stocks fell through trapdoors and eventually the entire market was pulled lower, anchored not by fear of a rate hike, but by the fact that it's now proven that there are no limits for the current Federal Reserve chairman.
Talk about dangerous. Essentially, like the Wicker Man myths spread by Julius Caesar of men locked in giant effigies that were eventually sacrificed for the gods, Yellen was willing to burn stocks that already faced challenging times this year.
Big Government Fail
Most of the time, few Americans believe that the government in Washington will do the right thing. This has been underscored by a recent Gallup poll. In fact, it's shocking just how little trust we have in the federal government stepping up to the plate and looking out for us unconditionally.
As it turns out, people aren't just in a bad mood. Government failures are soaring and leaving a lot of questions on how it can be fixed. A report by Paul C. Light at the Brookings Institute follows government failures via news stories and indeed there has been a surge in incompetency as government has failed at either operations or oversight.
|
Government Failures |
Total |
Yearly Average |
|
Before 2001 |
23 |
1.6 |
|
Since 2001 |
41 |
3.0 |
|
Major Failures Under Various Presidents |
Averag Yearly Failures |
|
Reagan |
1.6 |
|
Bush |
1.2 |
|
Clinton |
1.8 |
|
Bush |
3.1 |
|
Obama |
2.9 1 Term 2.0 2 term 5.3 |
His conclusion is that failures usually involve omission, the inability to anticipate, and or act on intelligence. To me, this is more evidence of a broken Washington, DC, which I view as the single biggest impediment to Americans reaching their full potential.