Why Robert Shiller Is Worried About The Market

Tyler Durden's picture

The last time Robert Shiller heard stock-market investors talk like this in 2000, it didn’t end well for the bulls.

As Bloomberg reports, Shiller says when markets are as buoyant as they are now, resisting the urge to pile in is hard regardless of what else might be happening in society.

“I was tempted to do it, too,” he says. “Trump keeps talking about a new spirit for America and so you could (A) believe that or (B) you could believe that other investors believe that.”

What Shiller will say now is that he’s refrained from adding to his own U.S. stock positions, emphasizing overseas markets instead. One factor that makes him cautious on American shares is the S&P 500’s cyclically-adjusted price-earnings ratio: While the metric is still about 30 percent below its high in 2000, it shows stocks are almost as expensive now as they were on the eve of the 1929 crash.

Shiller is not alone.

“I don’t generally call the entire market wrong -- investors are very smart, highly motivated individuals -- but I find it hard to say why stock markets are so un-volatile right now," says Nicholas Bloom, a Stanford University economist who co-designed the uncertainty gauge with colleagues from the University of Chicago and Northwestern University.


For Hersh Shefrin, a finance professor at Santa Clara University and author of a 2007 book on the role of psychology in markets, the rally is just another example of investors’ remarkable penchant for tunnel vision. Shefrin has a favorite analogy to illustrate his point: the great tulip-mania of 17th century Holland. Even the most casual students of financial history are familiar with the frenzy, during which a rare tulip bulb was worth enough money to buy a mansion. What often gets overlooked, though, is that the mania happened during an outbreak of bubonic plague.

“People were dying left and right,” Shefrin says. “So here you have financial markets sending signals completely at odds with the social mood of the time, with the degree of fear at the time.”

But while the academics can look back and study and reflect on the nature of bubbles, the Wall Street types will always find excuses:

“It’s been a period of repeated shocks, and I think people get toughened against that,” Ethan Harris, Bank of America Merrill Lynch’s global economist in New York, says. “It seems like uncertainty is the new norm, so you just learn to live with it.”

We leave it to Mr. Shiller to sum it all up...

“The market is way over-priced," he says. "It’s not as intellectual as people would think, or as economists would have you believe."

Trade accordingly.

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moneybots's picture

2015.75 was the cycle peak. In fact, that was the day Putin started bombing in Syria, signifying a major inflection point, which is what 2015.75 was.

BarkingCat's picture

Sounds like reference to Armstrong with that fractional date.

If so, Armstrong said that was the peak in government. 

People are losing faith in government and it is downhill for them from that point on.

Third party and outsider candidates gaining influence and winning elections.

People switching investments from government bonds to private sector.

Governments getting desperate for  money as their ponzi scheme socialism begins to fail.

Snaffew's picture

yes...because all things in the market go straight up forever---forget global economic cycles and the exhaustive measure of constantly printing money to buy assets.  This can go on forever, because history shows that....wait---never before in history has anything been done like this.  of course we know how this will end---to the moon Akice!  Although it is daytime and the moon is below us---

mily's picture

Is Robert Shiller a modern version of Roger Babson?

skbull44's picture

This time is 'different'!

I am Jobe's picture

Shiller says when markets are as buoyant as they are now, resisting the urge to pile in is hard regardless of what else might be happening in society.


LOL- They are paryting , Sring Break, getting laid and posting on Fuckbook. What do you think they are doing. Do not tell the people bad news. Americans are too dumb and numb to this news. Tell em about ICRAP and they will be eager to listen. 

Snaffew's picture

ughhh...I hear all that rampant video sex on FuckBook is giving people a lot of viruses----those young un's will have to learn the hard way---wrap that racsal---and when i say that, i mean Mark Zuckerberg with a plastic bag!

Fed-up with being Sick and Tired's picture

Yes, Joe Cool, I agree! Obama and Clinton could have SPROUTED HORNS and had FIRE BREATHING happening and all would say they were angels. It is the same with these markets. We will HAVE TO SEE A SHARP SUSTAINED Correction, a move of over 50 points per day in the S&P 500, with OIL DUMPING (assets dumping) for a sustained down-move and this has not happened in years.

DelusionsCrowded's picture

Don't worry Be happy

small axe's picture

Greek farmers know. Americans are about to find out.

They stole too much.

Chupacabra-322's picture

Isn't the market rigged via the Criminal Fed's Exchange Stabilization Fund? Why are we even having or reporting on the "market" without addressing the 800lb gorilla in the room?

Paging Kaiser...

Iconoclast's picture

Tulip mania in its modern form = Snap inc.

GRDguy's picture

Or today's attempt to keep the South Sea Bubble afloat.

DelusionsCrowded's picture

What if the dollar is about to explode ? Inflation to infinity and beyond means that it is not the Market the is overvalued but that the dollar is worthless and the

Big Boys are trying to secure something of value with something that has no value . Green toilet paper might be a painful exersize.

Snaffew's picture

BTFD???   or...BTFT?

wdg's picture


The US economy and financial system has been turned into one massive CASINO since the establishment of the Rothschild owned and created Federal Reserve. Put another way, in the bosom of the US is a privately owned central bank that creates booms and busts at will for the benefit of a cabal of banksters. It is a system of massive theft and plunder of the American people and is leading to the total destruction of the United States. The Federal Reserve is a gangster organization more powerful than Congress and the President which must be bulldozed to the ground and the architects of this criminal enterprise indicted and when convicted hung high. There are no shortage of criminals but the last three chairmen - Greenspan, Bernanke and Yellen - is a good place to start before they escape to Israel. The US desperately needs another Andrew Jackson.

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."

- Andrew Jackson 


small axe's picture

"US desperately needs another Jackson"

what, Harriet Tubman not good enough for you? Mr Ben Shalom Bernanke was quite pleased with the choice of Tubman to replace Jackson on the front of the $20 bill...must be a den of vipers thing.


Snaffew's picture

then ride the coattails of these criminals to riches and financial freedom!

GRDguy's picture

If only THEY would allow that.

wdg's picture

Not easy competing with the CASINO that controls the system and knows where all the trump cards are. The Bankster Cabal manipulates the market and therefore knows exactly when the market goes up or goes down. Right now, they have sucked in retail investors, pension funds, etc., loaded with margin debt; and at a time of their choosing, when they are divested, they will pull the plug, bankrupt investors/pension funds and scoop up property at discounted prices. On top of that, the Fed has provided its bankster owners with free money created by the trillions out of thin air which they use to blow bubbles and plunder the American people. It is a wonderful system of massive theft if you own the Federal Reserve while producing nothing of value. I say oil the guillotines because there is a fearful reckoning coming.

Thought Processor's picture



"You are a den of vipers and thieves."


I would say that's pretty accurate.  Maybe now more than ever.

CHX13's picture

He wouldn't have uttered those words had it not been true then (too). Plus que ca change, plus ca reste la meme chose...

Goofball's picture

Well said, except for the anti-Semitism... just sayin'

wdg's picture

Based on genetic studies, Ashkenazi Jews are not Semites which kind of makes a mockery of labels such as anti-semitism which are designed to shut down debate, not to mention the right of return for the (non-) children of Abraham. Ashkenazi Jews are dominantly Kazarians.

MrSteve's picture

Updating the old peacenik bumper sticker and channeling George Bush...

One NORKular bomb can ruin your whole day!  meanwhile, tensions crank ever tighter in Asia...pray for peace.

Pasadena Phil's picture

"The market", defined as the main indexes, may be unvolatile but take away the FANGS and most everything else is very volatile. From watching "the market" every day, it sure seems to me like the indexes are being pegged by moving money away from one sector after another (except the banksters who control the trading algos) and into the FANGS. "The market" may be over-priced but if the market were to suddenly start caring about fundamentals again, smart money could quickly find value.

All we are learning since Trump was elected with a major anti-globalism mandate is that maybe we won't be able to vote our way out of the problem. You really have to wonder when the shooting will start and who will shoot first.

Hemlock007's picture

Shiller's take on CAPE needs to be adjusted for stock buybacks.  Though it takes into account the PE, that number is misleading since the stock buybacks distort the "E" with fewer shares.  If one adjusts that amount of debt accumulated due to the share repurchases then the 30% comparison to 2000 is eliminated.

Justin Case's picture

Putting lipstick on a pig.

Snaffew's picture

sounds like it could be a good SQUEEEZE song title----like "pulling mussels from a shell"!

Snaffew's picture

as one previous poster pointed out---many sectors have sold off hard while maintaining the CORE stocks of the S&P.  These are so heavily cap weighted within the index, that when they decide to sell these, they can rotate out and rally the oversold sectors, thus maintaining a lofty value on the indexes with hardly a bump in overall valuations.  it would take a complete flight to safety to crash these highly coordinated and manipulated markets---will that happen?  possible, but with the stranglehold they have on these markets---index trading may be a thing of the past---sure, there are a few points here and there, but you must be nimble lest you get cleaned out.

ronaldwilsonreagan's picture

He forgot to take his Soma?

Nesbiteme's picture

“People were dying left and right,” Shefrin says. “So here you have financial markets sending signals completely at odds with the social mood of the time, with the degree of fear at the time.”

This quote is instructive, or at least it should be instructive to us all, if we are investors or managers of invested money. Europe and the world for that matter had had hundreds of years of experience with bubonic plague by the 17th century. And if there was one lesson that came out of plague cycles (and the Dutch bankers were well aware of this) is that when people die, assets and wealth is concentrated amongst the survivors and this creates a wealth/survival euphoria which, one might successfully argue ( if one were  Hersh Shefrin, a finance professor at Santa Clara University) made the prospect of spending a fortune on a tulip bulb not only possible but very much desirable. 

A. Boaty's picture

Did he imply a new plague will keep the bubble inflating?

CHX13's picture

Sell in May... ...never to return??? That wasn't right for the last few Mays, though 2017 may prove the proverb right. On the other hand, the CB-put is still in play and whatever the FED does, if markets tank CBs across the world (especially the US/J/Europe) they will step in with much more newly created digial fiat to stop the bleeding. Time will tell how this all pans out, nothing good IMVHO. Good luck to all.

Dreedle's picture

Exactly.  These analysts they have on ZH are all seriously a bunch of morons. I have seen so many of the good ol posters disappear over the years because they are now broke for following the ZH articles


Pareto's picture

As evidenced in the last 15 minutes or so - its still BTFD!  Shiller needs to adjust his model to take into account central bank purchases of - well - everything.  Upon making this adjustment to his model, we could be confident that we wouldn't need bothering with this discussion again. 

Dreedle's picture

These market specialsts are morons.  If they had a clue it would be scary. 


One analyst is consistently calling market direction.



venturen's picture

you don't? Pretty easy.....unlimited printed money to the crooks on Wall STreet to buy anything and everything....with no attempt at the rule of law! $5 Trillion printed at the FED and $1 Trillion a year at Treasury.....along with global central banks....buy stock with other printed money!


ALL BASED ON DEBT THAT CAN'T BE PAID BACK....because the middle class is DEAD

Dr_Lucid's picture

Dot com bubble blew past this level by a mile so if anything, any talk of levels before the crash need to be adjusted to say "...near levels not seen since the bust of the dot com bubble."  Nobody used the '29 crash as a point of reference anymore given CB / PPT needs to be factored in to the equation. 

rycK's picture

Dot com bubble was in a very limited market. 

ZeroLearner's picture

Don't worry ... be happy, don't worry ... be happy!


gm_general's picture

"investors are very smart, highly motivated individuals" - Bwahahahahahaaaahaaaaahaaaa!!

Then why do most people buy at the top and sell at the bottom, over and over and over and... Because we are basically monkeys still in our behaviors.

rycK's picture

They either listen to their friends ["bonds are safe!!"] or to their broker who needs some churn and burn fees. 

biff_rapper's picture

We need some volatility, please.

rycK's picture

Such crap. Robert Shiller conjured up his own ratios, arbitrary as it was, and now makes economic pronouncemets upon this theory. 

chosen's picture

As in all Ponzis, the last ones out lose almost everything.  The old saying "The market takes the stairs up, and the elevator down."