Our abilities to discern the 'correct' values of assets is quite limited. At present, however, the prices of assets in U.S. financial markets do not appear to be clearly out of line with the outlook for the economy and business prospects as well as the level of risk-free interest rates. Most bond spreads and equity premiums are still appreciably higher than a few years ago and comparable to their levels in past recessions. Moreover, money and credit have been quite weak, suggesting that asset price movements have not been fueled by increased leverage that would leave financial intermediaries vulnerable to a reversal of recent gains.
So, there you have it. No bubble. I personally am a bit more bubble-shy than Mr. Kohn, and I have reduced the "beta" of my portfolio quite a bit since the summer, thereby missing out on much of the recent rally. I am not sure what stock market investors are thinking. I can understand why the combination of 9.5 % annualized productivity growth and interest rates close to zero would be good for stocks, but I would be surprised if we see that continue.
I get the sense that Kohn and Bernanke think that financial markets eventually will get back to "normal," where that is defined as what existed in 2007. In their view, 2008 was a freak liquidity crisis. Those of us who are more Austrian in leaning tend to think that the necessary reallocation of physical and human capital might result in an economy that does not bear quite so much resemblance to the economy of 2007.