Investors still Have Confidence in Janet Yellen...

‘The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.’

– Jesse Livermore, How to Trade in Stocks

The trouble with capitalism’s guardians is that they have no respect for it.

Markets have been around for at least 2,000 years. Since then they have evolved in many directions, with fancy and sophisticated techniques…and elaborate systems and complicated instruments that take a PhD to understand.

But despite all the brain power put into trying to figure them out, markets still surprise, confound and puzzle everyone. There is still no formula for predicting market movements. And even the smartest and most experienced traders often wash up.

You’d think Janet Yellen and other central bankers would take a step back and stand in awe. Like astronomers looking at the heavens, they should be studying its black holes and its exploding supernovae. Or at least looking for signs of intelligent life.

Instead, Yellen et al ignore the intricate mechanisms that balance supply and demand; they want to force people to demand more. They have no interest in discovering prices; they want to impose their own prices. And they could care less what Mr. Market has to say; they only hear their own voices.

More guards than guardians, they believe they can improve the markets…control them…whip them into shape…and force them to do their bidding.

The gods must be rolling in the aisles.

Closer to bubbledom

‘No need to lift rates to curb risk, says Yellen’ is how the Financial Times reported her position last week.

Someone must have told her that prices of houses, art, bonds, stocks and other assets are all getting closer to bubbledom.

At the top end, mansions are once again setting records. Paintings of no obvious interest are fetching millions of dollars at auction. And US stocks are at levels never before seen.

Meanwhile, debt levels are higher than in 2007, with US corporations borrowing record amounts — far in excess of profit growth.

For example, Bank of America has borrowed $7.6 billion this year. Oracle has borrowed $10 billion. And Cisco has borrowed $8 billion.

And James Grant of Grant’s Interest Rate Observer reports that the iShares Nasdaq Biotechnology ETF, when accurately measured, trades at 2,000 times reported 12-month earnings.

Read the rest of this article at The Daily Reckoning