Bob Shiller Warns "It's Different Now, We Can't Trust Momentum"

Tyler Durden's picture

"I just don't see evidence that people believe we are launching into a great new era" of home price appreciation,"that's what we had in the early 2000s." Simply put, he chides Faber and Cramer, "people are not so excited about the future," in spite of record high stock prices (and surging home prices) as it seems the Fed's plan was foiled again. In a fascinating to-and-fro, they note "we don't want to go back to 2005," even though "it would lift the economy" since "we know how that story ends." The hedge funds and 'investors' proclaim themselves long-term investors, but Shiller notes "they are not, what they have learned there is short-run momentum in the housing market," and will bail at the first sign of that ebbing, "it's different now, we can't trust momentum."

Some uncomfortable truths from the Nobel winner...

"Real homebuyers are not as excited about the housing market as the price increases seem to suggest..."


"It's more of an 'unusual' demand from investors that's driving the market now..."


"...the market is driven more by psychology than affordability"


The rental market demand 'excuse' for growth and long-term gains is obsequious as Shiller asks rhetorically, "how can these guys not notice how fast prices have been going up and historically momentum is a much better play in housing than it has been in the stock market." He adds, "I'm pretty sure [an exit] is on their minds," but as he warns, "they are not going to say this, of course."

"It looks like we are a little bubbly in the stock market,... if it keeps going up like this, the expected retrun on the stock market will fall below the TIPS yield."



Former Fed official Kevin Warsh didn't help:

"Housing and housing assets are going to give you one signal," Warsh said in a "Squawk Box" interview. "[But] there is a broader cross section of data from the consumer, from the business, from trade and from exports. So this preoccupation with housing strikes me as really quite dangerous."



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naughtius maximus's picture

Go Long Permanently High Plataue!

knukles's picture

The olde axiom "Don't fight the Fed" referred historically to the rallies in stocks which always started during times of easy money via P/E expansion.  Which were then later justified via E growth.  Pretty simple, actually, and one of the reasons my/our equity brethren always claimed the equity market to be an effective discounting mechanism*

Well, this time it might be different.
That being we're in a liquidity trap.
meaning the efficacy of easy money will not be followed upon by the E growth to justify the P growth or in other-words, the P/E expansion.

What will be the outcome?
Hell if I know as this appears to truly be new territory.

But without E, P/E will not likely persist, meaning downward P.

Yeah yeah yeah  all I know is I'm getting my ass handed to me in PMs while not playing in equities and am getting a bit testy around my crusty the clown edges.

WhyDoesItHurtWhen iPee's picture

Hang in there K, PMs are not for todays, but for tomorrows.

Freddie's picture

Don't fight the Ponzi.

CrashisOptimistic's picture

It's even worse than that, knuckdood.

The easy money is financing stock buybacks to camouflage E (EPS).

Personal income is falling. There is not going to be topline save-the-day recovery.  Oil costs too much to provide the muscle to do anything.  The housing bullshit is all apartments.  There is no single family home sales recovery and that means there's no wealth engine for the middle class.

It's not just new territory.  It's a mislabeled map enroute to it.


WayBehind's picture

I cant believe those two clowns are still on TV ...

grid-b-gone's picture

Signs for "rent to own" are popping up in my area.

This may be one solution for RE investors who did not think through the operational and maintenance end of RE investing. 

Mal-investment's unintended consequences will reveal themselves.

acetinker's picture

I saw that for awhile, too.  Then those signs disappeared and certain homes in the 'hood underwent frenzied renovation.  Now, those same homes are adorned with yard signs that say ABC, or XYZ partners, associates, etc'. -not the usual realty folks.  Hope they sit there 'til they rot, personally. 





CrashisOptimistic's picture

I see completely empty houses around me.

I also see a bizarre explosion of boats and 4 wheelers and RVs parked in yards.  And some of those yards are the houses with no one in them.  Can't figure it out.

CheapBastard's picture

Landlords are having a tough time in my area. Property taxes higher, homeowners insurance shot up this year and maintenance is rising as workers demand higher wages for their work. And it's BS they can pass it on to the renters since the area is oversupplied now with too-many-to-count houses "For Rent" and thousands of apartments and new houses being built.

Seems everyone wanted to "Make a Million" being a Landlord. It's not gonna happen. That Bull market is over. Add to that rent control on the horizon and it's "Yips!!"

Colonel Klink's picture

Can't spell Shiller without SHILL.

Al Huxley's picture

Bob I have some bad news for you - no matter what the situation - outrageous bullishness, outrageous bearishness, miraculous new technologies, miraculous new mine discoveries, miraculous new financing methods, miraculous new manufacturing methods, one thing is constant - Its NEVER FUCKING DIFFERENT THIS TIME

CrashisOptimistic's picture

You're wrong, Al.

There have never been 7 billion people walking around before.  Ever.

Al Huxley's picture

Which is going to eventually demonstrate that the idea that 'human populations are somehow exempt from the laws that govern say, rabbit populations and while those populations eventually bust, the human population is immune to that type of event' is also bullshit, again proving that its never different (although in a somewhat different context and hopefully on a longer timeframe as I don't really want to take part in the great population crash, whenever it inevitably occurs, and whatever the eventual trigger is)

NidStyles's picture

The difference between a population crash and a quality correction is merely the understanding of what is happening.


When you have malinvestment and welfarism you end up creating incentives for less than the best of the gene pool to continue reproducing without concern. So it's not that the world is over populated per say, it's more so that the producers are vastly outnumbered by the consumers.

Al Huxley's picture

LOL, you're on quite a roll tonight.

Shizzmoney's picture

They say this time it might be different.

The USA is not a liquidity trap,

Homes foreclosed

Stock markets oversold

It's all a crock of crap

Quant Jockey's picture

I live in a relatively affluent area near Seattle and there are no homes for sale or rent.  Prices are through the roof because there is no inventory hitting the market.  F'ing banks are sitting on the forclosures. 

fonzannoon's picture

Same here. The market is doing tremendous as long as you ignore the massive number of foreclosures the banks are sitting on. 

Make_Mine_A_Double's picture

@Quant Jock:

F'ing banks are sitting on the forclosures

I'm in West Seattle. It's off the hook again, but I'm not buying into it this time.  

djsmps's picture

I did a consulting job in west Seattle 8 years.ago. What a great place. And there's a deli in the little downtown that makes the most incredible sandwiches

Freddie's picture

Same boat here in a county almost as lib and corrupt as King County.   You also get the weekend browsers driving around.  Usually youngish with a BMW or upscale SUV and very aspirational.   Saw that shit last time with the young master of the universe and trophy bride or girlfriend in their B(ought)M(y)W(ife).  Cruising houses on the weekend. 

I have a mega McMansion going up just about next door - so the bell has rung at the top.

I have even had douchebags on the weekend come up wanting to buy if I am outside doing any yard work.  I want to tell them "F off Flipper!" 

She is on the market FISBO probably late January. I am done with stupid taxes.

I am either moving to a non lib county that does not tax you to death, another state, another country or buying bitcoins and going to live "in a van down by the river."


Seer's picture

Yeah, when the fuck are you going to finally do something?

Been listening to you complain for so long now...

There's no free lunch.  You get from the "system" so the "system" gets from you...  The fucking system is everywhere.

Sometimes you have to think outside the box.  And sometimes you just have to see that it's not worth losing the war over a given battle.

Again, while everyone was saying how property values NEVER went down I sold;  I then bought when things bumped along the bottom.  And when everyone was saying how property taxes NEVER went down mine DID.  I don't know whether I live in a "lib" or "non-lib" location: and, frankly, if I have to sort everything by some fucking label I'm missing out on the only thing that I actually HAVE- my life.  I would like to think that because I spend more of my time understanding things work and less time trying to label them (or serve as some useful idiot) that I've managed to maximize what I have (which, while tons better than the majority of humans on the planet, pretty average in terms of western social structure standards).

Limbo is hell.  Get out of it and get on with life.

"yard work"... have to laugh... my wife and I are out cleaning and digging drainage ditches- That's fucking WORK!

Seer's picture

Seattle is one of the few places where there are actually "jobs," and some hint of a "future."  Of course, this won't continue as everthing around it (and other "stable" places) falls.

If you think that that is bad you ought to look north of you, at Vancouver B.C..  Damn Canadians managed to better their US competitors by quite a shot! (I don't think that they understand what the "winning" prize is going to be.)

johnmack's picture

its worked for debeers and diamonds why cant it work for housing?


Make_Mine_A_Double's picture

All the guys I work out with at the gym - lawyers, MicroSofties, etc. all are buying on the presumption that we have entered the virtuous cycle again. These are otherwise pretty sharp folks in their respective fields of endeavor.

It's an uncanny rerun of 5 years ago. The only thing that has changed in the cycle compression is shorter and shorter.


NOTaREALmerican's picture

Re:   lawyers, MicroSofties

There was an article in the local Sacramento paper a few days ago saying the high-end housing is selling well.

As the top 10% is doing fantastic the housing market for that social-class should be doing well.   It seems the housing market for the peasants has somewhat stagnated.

Temporalist's picture

They are the "it happens to the other people and it won't happen to me" type perhaps.  Always smarter than the other guy by half.

Seer's picture

In a way I'm rooting for them.  I'm hoping that they actually succeed in taking out the legs from under it all.  If they crash the banks then maybe my mortgage hedge will pay off...

Nick Jihad's picture

This time is going to be different. This time, i have the benefit of hindsight, and so i'm going to recognize the top, anticipate the collapse, and cash out with my gains intact. I just know it.

Seer's picture

Yup.  And what's really scary is FB & TWTR stock prices.  We've lots all perspective on what "investing" was really supposed to be about: now it's no more than playing the Slots.

TomGa's picture

And a single bad or hacked tweet could cause the entire thing to utterly collapse in seconds.  Lot's of confidence in the structural integrity of this "market."  But you can't fight the Fed, so trade on higher...  LOL.



docmac324's picture

2007 crash, seven years of Chapter 13 equals free and clear 2014.  Time to buy again mentality.  They will continue to line up until they die.

Wahooo's picture

I like that. It all hinges on a tweet. LOL

thorgodofthunder's picture

From sub prime loans to sub prime homes.

PT's picture

See, there was this really clever business man.  He was so clever that, at the time, I didn't realize how clever he was.  I was totally gobsmacked that he could sell stuff for a lot more than what you would pay elsewhere and customers would line up and buy his crap.  Why would anyone pay 2 grand for what they could buy elsewhere for 1500?

Eventually I learnt about the power of "interest free loans" (of course it's "interest free" - that is why the principal was jacked up, hence the higher prices) , "no repayments for four years", the powerful force of human stupidity, and the magic of obtaining money that customers have not yet earnt (and may or may not earn - who knows?)  Customers have no money?  No worries!  Use the money that they might have in the future.  Now you have unlimited "rich" customers.  But now the bar has been lowered this far, how will the next "innovative businessman" lower it even further?

Sometimes I am tempted to risk my credit rating, just to see how far this "free money" thing can be pushed, but that is not the type of stunt that I can normally get away with.  Instead, maybe I could find a debt collector and a banker and follow them around for a week or two.