Do you know anyone who's ever lost their job and immediately felt the need to tell everyone how they really feel?
After four years, Janet Yellen's tenure as head of the Federal Reserve came to a premature end last Friday, when President Trump denied her a second term and instead went with Jerome Powell.
She was not pleased, stating:
“I made it clear that I would be willing to serve, so yes, I do feel a sense of disappointment” about not being renominated, Yellen said. The only woman to serve as the head of the U.S. central bank described her work at the Fed as “the core of my existence.”
I don't know about you, but it sounds like she's pretty pissed.
She wasted no time cutting through the typically opaque fed speak and letting media outlets know how she really feels about the economy.
After all, it could be argued that Janet herself was responsible for many of the things President Trump took credit for in his State of the Union address recently; such as rising wages and the lowest unemployment rate in modern history. Then he turns around and replaces her with his guy.
According to Yellen, Prices High for U.S. Stocks, and Real Estate
"Price-earnings ratios are near the high end of their historical ranges."
Commercial real estate prices are now, "quite high relative to rents," Yellen said.
"Now, is that a bubble or is it too high? ..But it is a source of concern that asset valuations are so high."
This may sound tame, but for a 71 yr old Fed Chair used to giving boring, carefully worded speeches that divulge nothing, it is the equivalent of standing up, and waving your arms and shouting.
It is essentially, something she would have NEVER said two days earlier.
She's not the only one sounding the alarm..
Former Federal Reserve Chair Alan Greenspan had this to say about the economy..
"I think there are two bubbles, there's a stock market bubble, and a bond market bubble." And "..I think we're working towards a major increase in long term interest rates."
(We have) "a fiscally unstable long term outlook, in which inflation will take hold..."
"We've been through almost a decade of stagnation and w'ere working our way towards stagflation."
When asked when, Greenspan responded:
"Sooner, rather than later."
The Takeaway is this:
You have not one, but two former Fed Chairs saying the Stock, Bond, and Real Estate markets are in a bubble. Prepare for higher interest rates and the Return of Inflation.
Some actionable steps might be to:
- Sell overpriced assets and take profit.
- Lock in low fixed interest rate debt.
- Go long Gold and Commodities
- Make yourself indispensable at your workplace for when the next inevitable recession arises.
Until Next Time
It's your move.
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