This page has been archived and commenting is disabled.
Bob Shiller Fears "Substantial Decline" Sees Dow 'Fair Value' Around 11,000
"This is a dangerous time," warns Nobel laureate Bob Schiller as he warns of the false signal that typical P/E ratios are misleading and in fact his CAPE ratio (looking through the cycle) implies "fair value" for The Dow should trade around 11,000 and around 1300 for the S&P 500. "There is a risk of a substantial decline," he adds, warning that the recent rebound "maybe someone's good will effort to stabilize the market," and in fact the market's valuation is high now and people are over-exposed.
Schiller unleashes some inconvenient truths on CNBC...
»
- 36637 reads
- Printer-friendly version
- Send to friend
- advertisements -
11k is still too high.
9,000 is about right.
He's got to be padding those numbers for credibility's sake. He has a reputation to protect.
When markets gyrate so do pundits opinions. Someone will guess it right and be considered wise.
Where's he been for the last 20 years of bubbles?
Now he warns after the bubble has popped.
He looks at fundamentals too closely. That's why he's never correct. Fundamentals obviously don't matter since the numbers have never been worse and the stawk market and housing market holds steady; it's all up to Fed printing policy and bankers.
No Becky, millennials don't get in on the market because they are BROKE. Who paid your student loans? Buffet?
is it true that she banged buffet? ..that’s what I heard...
Good for Buffet. I'd tap Becky for a burritto
But what's her face's hair looks FABULOUS!
Yeah, but what look is she going for--Jennifer Anniston circa 1998?
I think he's ignoring a couple of other items....human behavior is a series of actions and reactions.
if the market today, were to drop to 11k..or even if it did between now and the end of the year. There would be a gigantic contraction in retail level spending by all those who thought they had real wealth, when they truly had paper wealth. So, 11k is based on topline/bottomline figures at todays levels. 11k contraction would begin the self feeding perpetual motion downward spiral....the same way we have watched the upward spiral mentality (e.g. go ahead and put 20k on my credit card when my 401k appreciated by 30k)
because companies are already strapped with debt their sensitivity to a top line contraction would be significant and force hundreds of companies into the same position that JCPenny's and Macy's now find themselves in. (i.e. burning cash).
the real party begins when the cash burn bonfire ends...and, all bonfires will end.
Not really, he's just doing a direct correlation. The problem is the number is a variable and not a constant, but his audience can't understand a complex system. The CASE is deteriorating quarter by quarter and honest value is meaningless......
After over-correcting to ~6K or less.
Index fell from 14k before 2008 crash to 6k post 2008 crash.
You think it should still be at 6k?
I'm far from expert in these things but I would have thought 14k was far too high, but 6k was far too low.
I'd say somewhere around 10k seems sustainable and it reflective of the reality.
Artificial means were used to put the brakes on the crash back in 2008. 6K IMHO was not an organic stopping point. If left unimpeded by "intervention" I believe it could go lower.
A lot of those "stocks" are empty Potemkin nothings, others reflect something, but they are propped up way too high by cheap money. Oddly, that actually devalues them in the truest sense. The underlying companies don't "act" like their values, don't make decisions like their values. Pull out the rug, they fall harder, maybe unable to recuperate because they are living inside a lie and it will take them too long to strategize for the truth.
There is no doubt that stocks would have continued much lower if FASB 157 had not been done away with (not to mention masssive QE). It ushered in Marked to Unicorn which still exists today.
Many were looking at 3000 Dow and $3000 gold.
No.
The situation now is a LOT worse than 2008 as explained in several recent ZH articles.
The Feral Reserve nor ECB nor IMF nor any central bank have any capabilities left to prop up ""markets"" as they had then
Corporate buybacks have hit their limits too
China is imploding along with every other emerging economy the past ten years
And so on..
So expect a complete massive epic biblical crushing market implosion down to fair value of about 3000 on the DJIA
Why 3000?
Cause I'm being optimistic.
Agreed. In fact, I think the resulting failure of all fiat currencies will lead to the end of publically traded shares in corporations for the foreseeable future. We're staring at a complete global financial collapse. Epic; correct.
we will see. I think this guy is smarter than we think, saying 13000. He probably knows its a lot lower than that, but knows that if he says that people will just write him off as another crazy person.
Exactly. I have read between 5,000 and 7,000
The market is always right, but, unfortunetaly the market was silenced in 2009 by the Federal Reserve.
I guess this would matter if value had anything to do with modern day markets.
It doesn't.
So it doesn't.
This makes how many dead canaries?
until the corrupt mega banks are broken up....everything is dangerous.
GAAP p/e 12 for S&P would be around 1200, actual earnings have been negative after non-GAAP legal fraud accounting, so maybe 1100 is fair.
Ahh, ha, ha, ha, ha...those CNBC douches probably wet their panties.
Dow 11k would mean a P/E of about 10. How is that fair value?
P/E's are irrelevant
Correct. P/E pumped by paper and heroin.
Buybacks, bitchez.
Duh! Nothing left to buy...so the fundies just throw the dumb money they are handed, at the same over-valued stocks again and again, while smart money sells. Peak everything has arrived and ECB's promise of moar QE is going to do nothing...just show how desperate they are. Wait until all those millions of unemployed migrants start rioting for more free stuff. Coming here soon too. Only fools are still in this manipulated market.
"No one saw it coming"....as in no one watches CNBC. Har-har.
Date? Say....10/20/15, has a nice ring to it. No rhyme or reason...just pulled it out of the air. Sort of like Wall Street advisors.
I am aware that Schiller is much more informed than I about these things, but 1300 was where the S&P 500 was in 2007 when this whole thing kicked off. I strongly suspect he's padding these numbers so that people don't call him a nutcase. I can't see "value" as a return to the previous bubble highs.
Can someone poke a hole in that argument? I just don't see it and think it's more probable Schiller had to pull punches rather than tell the ugly truth.
He apologized and said "Sorry I can't do any better than that" so take from that what you will of him cheerleading.
It was almost as if someone was prompting him in his earpiece to say something more positive and he slipped. Or he was prepped prior to the interview to not sound too negative.
Think....Adjusted for ZIRP!
wow Becky got a new botox redux it seems
If you listen to his interview carefully, he stated that this market is being held up (manipulated).. CNBS has been trying to pull the "correction call" out of him for over two years. Well, now he's calling it. Along with just about every other financial heavyweight out there.
Hope he checks under his car before putting the key in the ignition.
Right out of the movie "The Pelican Brief"...
No! Stop! Get out of the car!
This Time is Different.
I might agree on shillers view. He might be mentioning some fair value reasons but the point of all of this is regarding the mark down on the black monday etf imbalances, specially on the equal weight etfs and high option volume on that day, and flex options. Yes yes mr. Shiller, you might be very right. And i am also betting on it with 3 month deep deep OTM Puts, while they are cheaper than a cup of coffee. As for the lottery ticket approach, i would recomend buying deep deep otm puts on equity indexes for a huge% potential return. But hey, i remind you, its the lottery ticket approach. If you lose the premium on those puts, its not a big deal for your portfoolio
Becky Quick wants for fuck Warren Buffet.
again?
Euphemism of the Year = "Someone's goodwill effort".
Yeah,
that earned a smile.
Talk about an open ended statement.
Wtf does that even mean, "someone's food will"? In the markets? Lol.
Look, Mr. Shiller, the Dow has reached a permanently high plateau, ok?
Drone the unpatriotic traitor
Truth is treason in an empire of lies
A question:
What would QE look like in an environment without ZIRP?
I mean, what if we had - for example - QE4 or QE5 with interest rates at 2.5%?
What about just removing QE and Fed Rates and let investors, savers and borrowers decide what the rates need to be?
That's radical talk, right there.
Cantillon effect + less punishment of savers = Less perverse wealth re-distribution. (Still perverse, but less so).
"Fair value"? That's an imaginary concept. What seems fair to him, may not seem fair to a million other investors.
But he's an academic. So that accounts for his imaginary worldview.
And that's why you see $250K houses selling for 1.5 Million.
Schiller's talking land, lumber and labor + 10-15%. A real value tied to costs vs. an artificially pumped up cheap credit, speculative bubble "value".
Not imaginary at all.
The only thing that makes that house worth 1.5 million is if you have a sucker on the line to buy it for 1.6 mil.
Right...something is only worth what you can get for it.
Fair value 11,000? ROFL! Dream on.
8000 might be a bit more accurate.
Think Google, Apple, Microsoft, Facebook, Twitter as examples.
Their market values far surpass companies which produce goods.
We can survive without any of the aforementioned companies. We have done it not that long ago.
However in countries such as USA or Canada where public transportation is almost non existent in many places, it is difficult without a vehicle.
Farming today would not achieve the results it does without modern equipment. We eat stuff grown on farms.
We can't eat Google, Microsoft, Apple, Facebook or Twitter. There is a ton of money invested in those few, and it it can vanish in a moment.
+1. We can never be reminded too often of the existence of reality.
Microsoft is banking on Windows 10. Be aware, it's easy to do...Rip out ad choice. Here's another malware. I won't be switching to Win 10 anytime soon.
http://www.majorgeeks.com/files/details/destroy_windows_10_spying.html
The new Microsoft toilet hooks up to your computer and Windows 10 so they can monitor your toilet habits. This is useful information of course, because they can sell that to the medical and drug industry to treat any symptomatic problems. And even to the psych industry if you shake it too many times. Something for everybody in Windows 10.
My hunch is 9500-10,000. This middle of month or first week of October.
On a long enough timeline DOW zero, eh.
If it weren't for that damning Nobel Laureate appellation.
"Fair Value"...what has that got to do with Wall Street..
maybe someone's good will (criminal FRAUD) effort to stabilize the market,"
I've gone up against a lot of Schills in my time and ya ain't no different Mr. Schiller. Always sucking up to the house.
The money bunny didn't like what he had to say. Oh dear!
warning that the recent rebound "maybe someone's good will effort to stabilize the market,"
Did this strike anyone else as weird or is it just me?
Out of the goodness of "someone"s dumb ole heart they thought they'd help out a little?
Weak.
dows fair value is 1000 and thats being conservative.
stawks have only risen due to central banks and companies buying back there own stawks, and of course zirp.
take away all that and thereis nothing.
I'm sorry. That number's wrong. It's 9,500. Then it bleeds down from there.
The CAPE index is a ten year average, of sorts. Should the CAPE number itself be suspect because of ZIRP, the various QE programs, and astounding government spending. Taking these recent market enhancements into consideration - and realizing how unsustainable and ultimately damaging they may end up being - I would assume the CAPE ratio to be too high.
Truth is ZIRP, QE, and 'drunken sailor' levels of government spending can continue for a while. But it seems the winds are changing. When it hits the fan the perceived-as-sober CAPE will be much too high and perhaps not temporarily.
"Fair Value" based upon what?
To determine if today's market value is fair you need to look forward and determine what the P/E is going to be next year....not that any of these old fashioned yardsticks apply anymore.
As long as interest rates are 0, we will not see a 8% earnings yield and 5% dividend yield on the DOW.
Wonder what Shiller thinks 'fair value' is for Treasuries?
I'd suspend the interview and get to know her better.