Alan Greenspan delivered his now infamous "irrational exuberance" speech on December 5th, 1996, expressing his concern that stocks were overvalued. This was big news at the time because it was a clear departure from his normal reticence in regards to the financial markets, especially asset prices.
Greenspan's concerns were eventually validated but not before stocks posted three of the best return years in history. Ultimately, he was right but painfully early.
Today Sir Alan is lamenting an "irrational exuberance" in a different asset class. Bloomberg reports:
Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates. Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television’s “Political Capital With Al Hunt.” “I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. …Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” he said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”
Clearly, the former head of the Fed is worried that long-term rates are too low and that they will likely rise in the future (bond prices will fall). To me this sounds an awful lot like his concern for stock prices being too high back in 1996.
He may be proved right again but, if history is to rhyme, there is a very real possibility we will see an epic blowoff in long-term Treasury bonds just like the late 1990's stock market blowoff before it's all said and done.
Alan Greenspan delivered his now infamous “irrational exuberance” speech on December 5th, 1996, expressing his concern that stocks were overvalued. This was big news at the time because it was a clear departure from his normal reticence in regards to the financial markets, especially asset prices.
Greenspan’s concerns were eventually validated but not before stocks posted three of the best return years in history. Ultimately, he was right but painfully early.
Today Sir Alan is lamenting an “irrational exuberance” in a different asset class. Bloomberg reports:
Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates. Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television’s “Political Capital With Al Hunt.” “I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. …Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” he said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”
Clearly, the former head of the Fed is worried that long-term rates are too low and that they will likely rise in the future (bond prices will fall). To me this sounds an awful lot like his concern for stock prices being too high back in 1996.
He may be proved right again but, if history is to rhyme, there is a very real possibility we will see an epic blowoff in long-term Treasury bonds just like the late 1990’s stock market blowoff before it’s all said and done.
The 13% stock market rally since early February has been led by a blistering 20% rally in the financial sector during that time as evidenced by the XLF:
The push this month to new highs has led the overall stock market's rise to new highs since the last, epic bear market (arguably) came to its conclusion in early March.
What I find interesting is that Bank of America, Wells Fargo and JP Morgan make up nearly a third of this popular ETF and the broader NYSE Financial Index has not performed nearly as well. In fact, while XLF pushed to new highs, its more diversified cousin failed to surmount its high of last October.
This means that the breadth of the rally is faltering as fewer stocks are pushing the indexes higher at this point. This key divergence between two indexes of the same sector suggests the current rally may be getting long in the tooth.
The 13% stock market rally since early February has been led by a blistering 20% rally in the financial sector during that time as evidenced by the XLF:
The push this month to new highs has led the overall stock market's rise to new highs since the last, epic bear market (arguably) came to its conclusion in early March.
What I find interesting is that Bank of America, Wells Fargo and JP Morgan make up nearly a third of this popular ETF and the broader NYSE Financial Index has not performed nearly as well. In fact, while XLF pushed to new highs, its more diversified cousin failed to surmount its high of last October.
This means that the breadth of the rally is faltering as fewer stocks are pushing the indexes higher at this point. This key divergence between two indexes of the same sector suggests the current rally may be getting long in the tooth.
Geico recently released an internal promotional video in which owner, Warren Buffett, makes a cameo appearance. From the looks of things, Warren has gone full hardcore heavy metal, ala Axl Rose:
Well, it turns out that another of Warren’s companies is going to have a little hardcore competition. Motley Crue lead singer, Vince Neil, just announced that he intends to create a NetJets of his own… but his jets will be nothing less than the Whiskey a Go Go of the skies.
It sounds like Neil intends the company to be some sort of Harley Davidson, Jack Daniels and Les Paul meet Hooters Air. Sounds interesting, no? Don’t be surprised, then, if the New Warren Buffett abandons his stuffy NetJets for the kick-ass, melt-your-face-off, skysolos of Vince Neil Aviation the next time he ventures out of Omaha.
Geico recently released an internal promotional video in which owner, Warren Buffett, makes a cameo appearance. From the looks of things, Warren has gone full hardcore heavy metal, ala Axl Rose:
Well, it turns out that another of Warren’s companies is going to have a little hardcore competition. Motley Crue lead singer, Vince Neil, just announced that he intends to create a NetJets of his own… but his jets will be nothing less than the Whiskey a Go Go of the skies.
It sounds like Neil intends the company to be some sort of Harley Davidson, Jack Daniels and Les Paul meet Hooters Air. Sounds interesting, no? Don’t be surprised, then, if the New Warren Buffett abandons his stuffy NetJets for the kick-ass, melt-your-face-off, skysolos of Vince Neil Aviation the next time he ventures out of Omaha.
Bio: Jesse Felder founded Felder & Company in 2000 as an independent investment advisor. Jesse oversees both the company's proprietary investment research and managed investment accounts. He is also the editor of the company's monthly newsletter "The Felder Report."
