They Used to Deny Bubbles Even Existed
Shorter version on secular stagnation and Jackson Hole equivocation on QE’s end:
“We had to blow bubbles because that’s the only way to get the economy to grow, and now we have to start thinking about the inevitable consequences of that.”
As does the bond market. There is nothing yet, however, to break the rationalization streak in stocks.
**Shiller CAPE updated through August 2014. Tobins Q is derived from what used to be called the Flow of Funds (Z1 is now the Financial Accounts of the United States) which is only updated through Q1 2014, which means that measure of the stock bubble is likely even greater at this point than what is shown above. Next Z1 update is not until September 18 and that will only include estimates for Q2 2014.
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