A quick look at the stock market beyond the Hindenburg Omen and other technical parameters.
There are many other indicators showing many stocks markets are toppy...
If you don't see this bubble, you're probably one of the following:
- a long-only equity fund manager
- someone that sells to long-only fund managers (or needs them on your show)
- you work in a senior position at the Fed
- you are visually impaired
- some combination of the above.
With that said, the ZIRP policies helping to prop up the market may continue even after "tapering".
Yellen's FED may also move other goalposts (such as a lower unemployment rate targets) so that ZIRP and twisting interest rates can remain in place for a long time - but these operations may become more difficult for central banks once the FED doesn't dabble itself in asset purchases and similar operations come 2014 or 2015.
In addition, the recent market euphoria drove stock prices higher not because of better earnings but because of simple multiple expansions in many stock markets (this was already the case in 2013).
Some contrarians even indicate the FED may re-introduce asset buying programs later in addition to ZIRP - or postpone tapering again:
Westpac's contrarian view calls no taper in 2014
"If we are wrong and the Fed does taper, it will be a 'start-stop' affair and it will be at least partially replaced by other forms of monetary stimulus," Westpac's Rennie said. "By 2015, we do see the U.S. economy getting closer to escape velocity and taper happening then."
Westpac's contrarian view goes against the grain of the majority of economists, some of which believe the Fed will start dialing back stimulus as soon as next week's meeting of the Federal Open Market Committee (FOMC).
As Rennie at Westpac sees it, the only clear justification for a Fed taper is that such prolonged easy monetary policy has reached the stage where it's benefiting Wall Street more than Main Street.
"QE is not working as designed," he said, referring 'quantitative easing' - the Fed's unconventional monetary policy. "If it isn't working (outside of dragging S&P higher), why carry on doing it? Thus the justification for taper is based on the declining marginal benefit being less than the rising marginal risk to the Fed's balance sheet and credibility."
Emphasis in the quoted text by author.
Sometimes it takes a bank from the other side of the world to tell Wall Street what's happening - maybe because the QE party has been too good for the local elite since spring of 2009 to realize it's near its end:
The latest QE rounds were nothing but a giant bonus for Wall Street and rich investors and a malus for Main Street. I completely agree here.