In the 90s, a Fed chief warned against “irrational exuberance” on the markets. Shares have increased by 105% in the next 4 years

The titles were triggered by an appearance of Powell where he was asked, after his speech, if the prices of the record actions of today affect the policy of the Fed. He replied: “We are monitoring this, but we do not care for any price level for specific financial assets. We have no opinion that we know what is the right price of any particular financial active. ” It was a classic circumspect Fed speech. He then added: “We examine the overall financial conditions” and he went further to note: “for example, the prices of the shares are quite appreciated.”

In a few minutes, the words “very appreciated” have made a ping in the financial world. The importance of words was a bit vague. Perhaps the Fed would in a way conceive of the downward markets, or, with its vast data, it could predict a drop in the market.

The ancients immediately saw the parallel of the incident with a speech president that Alan Greenspan pronounced in the 1990s. He mentioned the expression “irrational exuberance” – in a summary, whatever way – as a force which could push the prices of too high actions. No one heard this, however. His real message seemed clear: the most influential person of the greatest economy in the world thought that action prices were too high.

Today, this discourse is widely considered to be the configuration of the collapse of the 2000 historic market in which many new hot Internet companies have succumbed. These recent head editors ask: Could Powell’s remark play the same role in a roaring market fueled by AI?

But that’s not the right question. Greenspan delivered his speech in December 1996 – almost four years before the diving of the market. As he said Fortune Years later, “if you had left the market when I delivered my speech of irrational exuberance, you would have missed an additional 80% of the increase” of the value of the action. (In fact, it was closer to 100%.) As for Powell’s conversation last Tuesday – despite the task, the S&P 500 barely moved.

The lesson is not that investors tremble when fed chairs speak of actions. The behavior of investors is a collection of many forces, and the opinions of the head of the Fed do not propel the markets in one way or another. It doesn’t mean Powell is wrong. Its simple declaration according to which the actions are very appreciated is indisputable. Most of the measures scream that the S&P is incredibly too expensive. The price / profits ratio cyclically adjusted from the shiller is the highest it has been from the Dot-Com Pic. The price / sales ratio has reached a new summit of all time this week. The Buffett indicator – Ratio of the capitalization of the GDP market – the actions are very overvalued, and Warren Buffett has a huge cash cache because it does not find good deals.

The truth is that no one knows when the next crash arrives or when. Not even fed chairs.