This week, Fed Chairman Janet Yellen gave the investing world a meaty headline when she opined that stocks are overvalued, generally speaking that is. Almost immediately, tongue wagging pundits started comparing her comments to Alan Greenspan’s famous “irrational exuberance” quote. Remember that one? Well, here it is, in case you don’t:
“Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?”
Alan Greenspan—December 5, 1996 …Read On…
The opinions expressed within this report are those of John Norris as of the initial publication of this blog. They are subject to change without notice, and do not necessarily reflect the views of Oakworth Capital Bank, its directors, shareholders, and employees.