Fed Chairman Ben S. Bernanke said after a Nov. 16 speech in New York that
it's "not obvious" that asset prices in the U.S. are out of line with underlying values after a 64 percent jump in the Standard & Poor's 500 Index from its March low.
My favorite charts to exemplify this is the 1-year chart on
GE and Bank of America (NYSE:
BAC). Here they are, one on top of the other. Considering their debt issues (and trillions in derivatives), is it not obvious that they are very over-valued? Didn't Bernanke hear Meredith Whitney's interview with Maria B. on CNBC this week? Are these not super-inflated bubbles?
![Chart for General Electric Co. (<a mce_t target=]()
GE)" src="http://ichart.finance.yahoo.com/z?s=GE&t=1y&q=l&l=on&z=m&p=m50&a=" />
![Chart for Bank of America Corporation (<a mce_t target=]()
BAC)" src="http://ichart.finance.yahoo.com/z?s=BAC&t=1y&q=l&l=on&z=m&p=m50&a=" />You would see the same thing if you saw the chart for
Citigroup (NYSE: C).
The other "tale" about the stock market is that a declining dollar is actually good for the stock market. That is the perception and it fundamentally makes sense. From my point-of-view, the tale of the stock market is one riddled with a "hidden agenda". Exchange specialists and exchange insiders buy very low in plummeting times like March 2009, and they short stocks and sell their own inventory when the stock market gets way over-valued (which Bernanke, on some level, knows we are at, else why would he say the over-valuation is "not obvious" when it surely is).
Recently, Mr.Bernanke made a passing reference to the dollar. He didn't say much. Here's the whole quote:
The foreign exchange value of the dollar has moved over a wide range during the past year or so. When financial stresses were most pronounced, a flight to the deepest and most liquid capital markets resulted in a marked increase in the dollar. More recently, as financial market functioning has improved and global economic activity has stabilized, these safe haven flows have abated, and the dollar has accordingly retraced its gains. The Federal Reserve will continue to monitor these developments closely.
