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"When People Jump In Even Though It's Overpriced, That's A Bubble" Shiller Warns

Tyler Durden's picture




 

Bob Shiller moves beyond his normal fence-sitting perspective and goes full Marc Faber in this brief clip. Noting that his CAPE indicator of equity market valuation is flashing red (highest since 1929, 2000, and 2007), Shiller warns it is "when people jump into stocks even though they know valuations are high... that's a bubble," slamming CNBC's rosy perspective reflecting that this is the same as the dotcom rise. Notably he warns specifically "The US equity market is one of the highest in the world," and now is a good time to diversify away from it. Additionally Shiller warns of the slowing momentum in the housing market... warning that mean-reversion is likely with risk for further decline.

Shiller also slams the bull$hit addage that "booms don't die of old age..." warning that inventories across goods-producing industries are building worryingly...

As Shiller explains...

 

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Wed, 07/01/2015 - 22:03 | 6260652 wendigo
wendigo's picture

I really love saltines. This fact is irrelevant to the article. 

Wed, 07/01/2015 - 22:22 | 6260710 ebworthen
ebworthen's picture

Crunchy and salty, what's not to like?

Put some sardines in olive oil on them for the full effect.

Wed, 07/01/2015 - 22:29 | 6260734 Dead Canary
Dead Canary's picture

Cambazola cheeze. It's a life changer.

Wait, wasn't somebody blabing about something?

Wed, 07/01/2015 - 22:35 | 6260761 Mr. Ed
Mr. Ed's picture

not to change the subject, but: every article about the dangers of holding cash and imminent disaster drive someone to buy something...ANYTHING!!! AND THAT drives up the price of assets. Duh!

Wed, 07/01/2015 - 22:43 | 6260787 Who was that ma...
Who was that masked man's picture

Why do people say "not to change the subject" and then go right ahead and change the subject?  Just like they say, "not to be rude", "not to be gross", or "not to be disgusting" and then go right ahead and say something rude, gross, or disgusting?  Of course I'm making no references here to talking horses or any other barnyard animals who are generally more polite.

Thu, 07/02/2015 - 01:36 | 6261129 Chauncey Gardener
Chauncey Gardener's picture

Except for PM's. They nosedive in value once you buy 'em. Then you question your sanity vs: your patience.

Wed, 07/01/2015 - 23:38 | 6260918 Md4
Md4's picture

I love crackers and coffee; try dipping them in coffee sometime.

Great together.

Now my other two cents worth...

What Schiller and the many others don't acknowledge outright, is that a lot of the yahoo homebuyers are nuts.

That's right, just plain nuts.

And so are we; we continue to put up with it...AND the societal risks.

They can think of nothing else but flipping a shack for more than they signed on the dotted line, and the racket makers, including YOUR government, bends backward to help 'em do it.

If we want to recover, we HAVE to rid ourselves of just kind of thinking, and force folks to EARN a shack the old fashioned way...work for it, and assume the full risk themselves.

Same is true of the Wall Street casino.

It does no good to endure the pain of repeated crashes, if we don't learn that our thinking is the problem, and easy access to unearned "prosperity" is NOT the solution.

How many times do we (especially, the non-participants) have to see this movie?

m

Wed, 07/01/2015 - 22:37 | 6260745 Mr. Ed
Mr. Ed's picture

how do you people feel about oats?

Wed, 07/01/2015 - 22:40 | 6260776 Dead Canary
Dead Canary's picture

Yea, were're a GO for oats there good buddy.

Wed, 07/01/2015 - 22:55 | 6260817 tarsubil
tarsubil's picture

I don't think we've hit a bottom so they're an eat.

Thu, 07/02/2015 - 07:19 | 6261423 Winston Churchill
Winston Churchill's picture

Porridge will glue anything.

Wed, 07/01/2015 - 22:32 | 6260749 wendigo
wendigo's picture

Sardines are my thing man. Half your daily intake of protein and calcium? Store forever in cans? Cheap? Yessir, I believe they are the ideal prepper food. I have hundreds of cans on hand. 

Wed, 07/01/2015 - 22:53 | 6260811 BandGap
BandGap's picture

Not to be rude but I am going to take one of those rare, after 10PM shits.

It was the sardines in olive oil for $100, Alex.

Wed, 07/01/2015 - 22:56 | 6260821 tarsubil
tarsubil's picture

Not to change the subject...

Wed, 07/01/2015 - 22:37 | 6260756 Mr. Ed
Mr. Ed's picture

anyone here had hay for dinner? ('s not bad!)

Wed, 07/01/2015 - 22:42 | 6260783 Dead Canary
Dead Canary's picture

I only eat merican. Never touch that foreign crap.

Wed, 07/01/2015 - 23:38 | 6260932 tc06rtw
tc06rtw's picture

  … yeah, we should all

  EAT AMERICAN:

bologna
pizza
spaghetti
tacos
bagels
chili…

Wed, 07/01/2015 - 22:58 | 6260824 BandGap
BandGap's picture

I hear they eat free range hay in NK.

Thu, 07/02/2015 - 06:16 | 6261330 northern vigor
northern vigor's picture

Dad ate grass for ten days in North Africa during WW2...he said it was really bad.

Thu, 07/02/2015 - 07:21 | 6261428 Winston Churchill
Winston Churchill's picture

T&A, coastal,alf alafa or something more esoteric ?

Wed, 07/01/2015 - 22:35 | 6260765 Who was that ma...
Who was that masked man's picture

If an old sailor is an 'old salt', is a young sailor a salteen?

Wed, 07/01/2015 - 22:43 | 6260785 Dead Canary
Dead Canary's picture

Ok. Waitin for the big one is makin us all silly. You don't want to be silly do ya?

Thu, 07/02/2015 - 18:44 | 6264079 Who was that ma...
Who was that masked man's picture

Oh Nooooooooooooooooo.

Wed, 07/01/2015 - 22:31 | 6260742 Occident Mortal
Occident Mortal's picture

Sometimes stock markets rise and stay high.

 

See 1945 thru 1960, as the S&P rose from 7.5 to 100, never dropped below 70 thereafter.

and 1982 thru 1998, as the S&P rose from 100 to 1050, never dropping below 720 thereafter.

 

There were two gigantic 1,000% plus rallies that largely endured. One of which happened under the gold standard and one of which happened under fiat money.

Wed, 07/01/2015 - 22:41 | 6260780 Wahooo
Wahooo's picture

Aww, now don't go telling that to loudly. You'll ruin the gloom.

Wed, 07/01/2015 - 23:33 | 6260914 disabledvet
disabledvet's picture

That's just equities...a relatively minor asset class in the North American economy.

For Americans...OVERWHELMINGLY...we are real estate speculators.

Hence "why no one votes anymore." Moving property is well nigh impossible with this current political class which only loves debt and taxes.

Good luck when that reset hits.

In the meantime..

Wed, 07/01/2015 - 22:08 | 6260667 FreedomGuy
FreedomGuy's picture

According to housing prices in my city, incomes must be rising ten to twenty percent a year!

Who does'nt love a bubble?

Wed, 07/01/2015 - 22:20 | 6260707 ebworthen
ebworthen's picture

"My CAPE index is higher than it was in 1929, 2000, and 2007..."

Enough said!  But just watch the pension funds and the 401K/I.R.A. crowd BTFD.

Wed, 07/01/2015 - 22:37 | 6260769 Yen Cross
Yen Cross's picture

  Ebbie you're probably right, but I have started to notice a breakdown in the equity indexes and sub-indexes.

 There's always going to be the 3rd year 'Sasquatch Capital partners', kids trying to earn their "red wings", but for the most part the markets are putting in lower highs.

Wed, 07/01/2015 - 22:35 | 6260760 Temerity Trader
Temerity Trader's picture

Well duh! Another pedestrian article telling us all how the Fed’s loose money blows bubbles, and likely benefits the wealthy the most. Yes there is a huge property bubble in N.Y. but it pales in comparison to the Silicon Valley bubble; the largest the world has ever seen. Propelled by 40-years of tech innovation and high pay; culminating in the useless I-watch. They bring in more cheap Indian labor and export the rest. It will be interesting to see how these people will make those $10k/mo mortgage payments working at Wal-Mart. Living in a small house and upside-down $1mil or more. They will walk away in droves! The repo man will snatch the Lexus and the Tesla. The debt-ridden fools will have nothing! Then the banks will fail and demand bailouts…Greece times 1,000. Delay and pray…more debt will fix it all. Just try to take away all the entitlements and watch the riots start. Bankrupt Medicare, Medicaid, Obamacare, 40 million using EBT cards, broke pensions, thousands of veterans claiming every disability known, but never left the U.S. Everyone wants to sit on their asses and collect government handouts. Why work? Sit around and play with a new I-Toy, watch ‘Dancing With The Stars. Yes, just try to take it all away…

Wed, 07/01/2015 - 23:04 | 6260845 BandGap
BandGap's picture

Is that a Mexican poncho or a Sears poncho?

Huh, no foolin'.

Wed, 07/01/2015 - 23:28 | 6260896 scatha
scatha's picture

Bubbles are credit expansion/contraction, government policy driven monetary intervention cycles well described in "Money Masters" which now are completely divorced from economic cycle, which is stuck in US in depression levels over thirty years now.

In other words boom and bust cycles are only fueled now through credit policy into specific market tradable assets selected and ordered by policy makers.

The world central banking system is trying to moderate bubbles’ deflations or collapses through creation bubbles in another asset class just to maintain values of collateral from the initial bubbles.

For example if you overpaid for your house and prices are falling and you cannot sell without massive loss, windfall from another bubble is able to cover your mortgage, losses and/or margin requirements, so you hope and wait for better times. And so you go from one bubble to another and this relates all abstract paper assets and derivatives including, debt, oil and gold etc.

Hence, crash may occur only when CBs run out of bubbly and no more bubbles could be created otherwise party will go on while more and more weaker rats in this rat race are being eliminated via attrition and slide into socio-economic margins like most of us even if we do not know it yet, we are next.

Such practice, in essence denying basic tenet of capitalism namely capital re-production and recycling into productive assets, which is in the first place is labor, was and is widely implemented over last 30 years by world ruling elites and now even in China rendering population obsolete in grand scheme of illustrious progress of civilization.

The real economy is dead so its real economic cycle that included revolving commodity and labor investment assets, recycled in and out economy a classical capitalistic re-production cycle. This type of process is dead and buried.

There is no revitalization of labor power as well as commodity demand due to collapse of labor income and collapse of asset or commodities prices controlled by vast majority of population subjected to deadly deflation spiral due to removal of money from circulation among ordinary people a devastating process, getting stronger and more intense as bubbles become bigger and more numerous.

The only thing that keeps us from massive unrest, hunger and ultimately extinction now is money supply from government social programs such pensions, SS, social welfare, technical/scientific funding, military or security/police non-productive funding which ironically fuel spiral of debt needed to keep it blowing.

It’s like on Titanic, party was going on as usual while in lower decks people were slowly drowning. I hope that there would be not enough boats for all those murderous and gluttonous oligarchs when water reaches their noses.

Wed, 07/01/2015 - 23:52 | 6260974 QQQBall
QQQBall's picture

you go from investing to rank speulation. That feeds on itself for a while, but will end

Thu, 07/02/2015 - 00:25 | 6261037 JoWazzoo
JoWazzoo's picture

Have ro love the CNBS spinheads who always look with an incredulous expression on their face when someone does not tow the stocks only go up line.  Yesterday row guests were discussing s & p at year end.  One said 2,250 at least on S & P.  Other chap totally agreed and added "It is only 10 % from here.  After the run of the last 7 years.  Someone needs to explain how averages are calculated - as in stocks go up an average of 7 or so % per year.  Always love Shiller's perspective as he does not take any shit.

Thu, 07/02/2015 - 01:18 | 6261105 reader2010
reader2010's picture

it doesn't matter anymore. just btfd folks. 

Thu, 07/02/2015 - 01:33 | 6261124 q99x2
q99x2's picture

I hope while Shiller is down here in the fight club somebody straightens his neck out for him.

Thu, 07/02/2015 - 02:47 | 6261204 dojufitz
dojufitz's picture

Come to Melbourne Australia to see nuts.....i'm talking the home prices.....

This one just sold for $431,000US

http://www.realestate.com.au/property-duplex+semi+detached-vic-footscray-119825987

 

This suburb is on the west side and is about 20 minutes from the CBD of Melbourne....and is fondly regarded by most as a shit suburb to live in.

Thu, 07/02/2015 - 04:27 | 6261279 firestarter_916
firestarter_916's picture

I don't get it. He calls stocks overbought but he's in them.  He said a bubble is in for RE prices, but not selling his home.  Shouldn't you eat your own dog food when making statements?  I don't disagree with the stats and facts but BQ needed to really pinpoint him on an answer.

Thu, 07/02/2015 - 06:20 | 6261336 ArtOfLife
ArtOfLife's picture

The last time stocks were "fair valued" according to CAPE was in 1990, and a brief moment in 2009. So either 1) stocks being overvalued is the new normal, 2) his indicator is flawed, or 3) being out of stocks for 25+ years is a great investement thesis according to the professor.

Thu, 07/02/2015 - 18:44 | 6264081 dojufitz
dojufitz's picture

Shill......er.

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