Based on several measures of valuation “you would not see stock prices in territory that suggest bubble-like conditions”, or so said soon-to-be Fed pres Janet Yellen on Thursday. So let’s break out the bubbly and buy buy buy!! Well, not so fast.

You see, the thing about bubbles is that they can float behind your back, above your head, and sometimes just beyond the tip of your nose without you ever noticing them. But man when they burst…

Ben Bernanke gave his famous Great Moderation speech (a promise of economic smoothing resulting from sound monetary policy) back in 2004, and a few years later promised us that subprime mortgages posed little threat to the housing market (my, if he could have those back!). You’d think that Ms. Yellen, having been at Bernanke’s side the whole time, would do her darnedest to refrain from calling bubbles. But what’s she to say when asked a direct question? Well, she could give the correct answer, she doesn’t know.

That said—historically speaking—she’s probably right in terms of immediately pre-bubble valuations. But of course the most important factor in the most important of those valuation measures is earnings. As long as corporate earnings can come in near next year’s estimates, I’m sort of bullish on the stock market as well. If, however, a black swan swoops through and takes the economy with it, all bets are off. But don’t sweat that one, Ms. Yellen also said “at this stage, I don’t see risks to financial stability” (of course you never see black swans coming). Let’s hope she’s a better assessor than her predecessor…