Janet Yellen’s Bathtub Economics

“S&P 500 earnings have barely grown by 10 percent since late 2011, notwithstanding more than a trillion dollars of share buybacks. So there are bubbles everywhere— even the broad market is up by nearly 50% without any justification accept that the fast money traders know the Fed will keep banging the fed funds lever.
But it’s a fact that margin debt is at an all-time high—both in dollars and as a percent of GDP where it currently tops out at 2.73% compared to 2.66% in March 2000. Might not this have something to do with the Russell 2000 having recently traded at 100X reported earnings; or the fact that it had risen from 350 in early 2009 to 1200—that is, by 250%—in the context of the most tepid recovery in the recorded history of the Main Street economy where most of these small caps function.
As an institutional matter, Yellen and her merry band of money printers cannot possibly see any financial bubbles. Implanted squarely in the heart of the Wall Street speculation channel, bubbles is what they do.”
David Stockman
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