New York: 07:33 || London: 12:33 || Mumbai: 16:03 || Singapore: 18:33

Global Outlook

Chair Yellen

May 9, 2014, Friday, 05:25 GMT | 00:25 EST | 08:55 IST | 11:25 SGT
Contributed by eResearch


Federal Reserve Chair, Janet Yellen, made a regularly scheduled speech to Congress Wednesday and will continue Thursday. In it, she essentially said that the Fed will continue to help rig the markets by keeping the Fed's zero interest rate policy (ZIRP) in place for as far as the eye can see. With that type of comment, the markets (especially the S&P500) made massive reversals off of early lows.

But Yellen didn't say all was great; in fact, what she said was that there are problems that she worries about and this is what made the market rally. You all know by now that bad news is good news, because bad news means the Fed will continue to manipulate interest rates, which manipulates stock markets. In the speech she said that the housing market is slumping, there are geopolitical problems, and that there was "considerable slack" in the labor market.

Uh...what!? Since when have you heard from the professionals that housing was in trouble? Isn't now a great time to buy? Isn't it always? By geopolitical problems; does she mean Vladimir Putin and the Ukraine? What can she do about that? Will cutting rates to negative or reversing the taper make Putin stop? If so, she is mad. And did she actually say there was a problem in the labor market? Did she miss Friday's number and the screaming from the rooftops that all is well?

Chair Yellen doesn't just know what is a potential problem; she also knows what is not a problem. Market valuations are just fine. There is no equity bubble. Moreover, Wall Street and foreign all-cash buying of US homes has not increased real estate prices beyond historical norms.

We chose to believe Bernanke when he said the same thing leading up to the 2008 crash, and Greenspan before the crashes of 1987 and 2000. Why does being appointed Fed Chairman make people stop thinking for themselves and believe that these fools are infallible?

If she is wrong, I'm sure she will blame the weather - and all of the idiots on Fraud Street will lap it up.

As we started the trading session yesterday with a sharp drop in the markets, a rebound quickly took place during Janet Yellen's Q&A session in front of the finance committee. The markets sustained the upside momentum, and rode it into the close to finish up in the DJI and SPX. The COMP however finished in negative territory, as TWTR weighed down the Composite. As Janet Yellen is set to speak again today, we could see a very similar move take place. Look for quiet trading early on until her testimony, and then look for a slingshot up. I do caution that there could be a fast drop right after her testimony, as profit taking may take place. I still see the markets making progressive all-time highs.