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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Joe Cool's picture

A mushroom cloud in DC coulden't stop this market from going up....Only planned destruction will...

Haus-Targaryen's picture

I've thought the exact same thing.  

If 9-11 was to happen again today, the market would rally 600 points and not fall 600 points on reopen. 

Joe Cool's picture

If you can just press the Return-button and make the market move higher....You would have to willfully stop....The music that is

espirit's picture

Shiller's worried he's going to run out of Greater Fools to buy his dumps.

That, and the Algo dogs are going to eat him for lunch.

BullyBearish's picture

Funny how when it looks like things are going to turn, everybody crawls out of the woodwork and claims things are overextended...where the F(*k were these guys over the last 9 years...

evoila's picture

they were too busy being right. DC looks like gridlock that will block DJT at every turn, so things are going to start going south fast because now that hopium is going to evaporate, and we're going back to being at the end of Oct/beginning of Nov.

flicker life's picture
flicker life (not verified) evoila Mar 14, 2017 9:45 AM

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bamawatson's picture

flicker ?

i fuggin torched her !

Sanity Bear's picture

I can't read ZH anymore without this playing in the background: https://www.youtube.com/watch?v=nXlBESlGFPE

Got The Wrong No's picture

Add in the possibility of 3 rate hikes this year. Central Banks are in charge. 

847328_3527's picture

I play it safe and never buy any stawks with a PE less then 280 these days.

mtndds's picture

Its because the FEDERAL RESERVE controls the market.

Thought Processor's picture



Yes, the FED and the Algos have the whole thing on autopilot.


It won't deviate unless it's instructed to deviate.  Funny though how none of the establishment players will publicly acknowledge the elephant in the room.



Justin Case's picture

FED controls the merican economy and whether Trump will do anything to make the economy grow. Since the deep state doesn't like him, they will raise rates and make DJT a failure. Until the Gov'ts of the world, merica included, regain the printing of the country's currency, they are powerless.

GUS100CORRINA's picture

I have noted a number of comments about war-induced market rally and other things. 

As of this time, I believe the next event if it happens will be an "EMP" event and there will NOT be a market rally because electronic infrastructure will be DOWN for months. In addition, as of this time, based on latest PPI and projected CPI figures, I believe we are looking at a 'STAGFLATION" scenario ... rising prices and no growth.

I now believe the CBs have lost control.

GOD Help America if the MARKET decides RISK/REWARD is unfavorable for US debt and interest rates rise. Based on latest High Yield Bond Price vs DOW comparison, fair value for the DOW looks to be around 19,000, not 21,000.

US Treasury is also running out of CASH!!!!

Robert Shiller Is right to be concerned (worried) about the market. America is in unchartered waters!


BurningBetty's picture

My friend, this whale has lost its bearings long time ago and is heading straight for the beach.

NugginFuts's picture

BINGO! Banks and CAT would shoot to the sky on stimulus hopes. 

All news is good news now. Better bake that in to your algos, boys. 

Arnold's picture

Wait for it.

Giant Meteor's picture

Bots and Algos do not have emotions ...

Beyond that, the few humans that there is left, know that it will need to lievitate no matter what, as it must ..

Belrev's picture

Putin is not crazy to start a nuclear war. Neither is Trump.


Got The Wrong No's picture

There was a lot of Propaganda in that video. It said CNN Special Report in the bottom right corner and it was listed on You Tube as Comedy, dated March 13, 2017. I found Hillary's statements (Alinsky Projections) particularly funny. Bottom line, more Russia did it finger pointing with a few digs at Trump and no bad words about Hillary. 

Erek's picture

Way over priced? Who would have guessed?

mily's picture

Charlie Maggot from RBC had a good VIX call

mily's picture

Not for long tho, V-shaped recovery / VIX punding  to start in 3..2..1..

Dental Floss Tycoon's picture

They are unvolitle because central banks are buying  equities.

BorisTheBlade's picture

Just backstopping any move beyond what is considered acceptable limit. Greed and moral hazard accomplish the rest.

spicedune's picture
spicedune (not verified) Mar 14, 2017 8:38 AM

shiller needs to take a look at www.inflation.co and publish something similar that incorporates the cost of basic goods which are HOT right now

NugginFuts's picture

Dude, knock it off. Seriously. The spamming is beyond obnoxious now. 

Angry White Guy's picture

If you spent even 15 minutes actually marketing your website PROPERLY, you'd get twice the traffic you're getting from spamming this board.


VD's picture

if you factor in QE/ZIRP/NIRP, then the "market" is far worse than at tech bubble highs. do the math.

BandGap's picture



buzzsaw99's picture

the difference is that now everyone knows that the federal reserve guarantees the "market" only goes up in the long run. it is their only function.

NumberNone's picture

Just looked at CNBC for the first time in weeks. They are begging for the markets to tank under Trump. Promoting the Fed to get aggressive in raising rates, telling bears it's time to pounce. I.

The Fed needs to raise rates but I fear the timing is to use it as a way to hammer Trump on a worsening economy. i don't seem to recall such cheerleading for aggressive Fed action under Obama by MSM. It was always better to be cautious less they damage his pristine legacy.

buzzsaw99's picture

it won't work. everybody and their dog is hoping for a dip so they can buy. besides, after the bernank raised rates everybody flooded into money markets chasing yield only to have him yank the rug out from under them six months later. nobody is falling for that again. if the usa 10Y gets closer to 3% that might do the trick but it will tank the general economy so bad (oil, real estate, etc.) that they would have to start qe again. the fed is boxed in.

BandGap's picture

So, when you are boxed in you usually pick the best way to die.

Blaze of glory or hold the door open and get as many of your friends out of the burning building as possible?

froze25's picture

The Bernake does not like the deflation.

NugginFuts's picture

"everybody and their dog is hoping for a dip so they can buy."


How much cash do you figure is left on the sidelines? My guess is mom & pop retail investor are running out of money to throw at the ever growing bubble. Finally, when all the money is locked in, down goes the elevator. 

The next dip to buy (for me) is about 50-60% lower than where we're at right now. 

buzzsaw99's picture

you wonder where the money on the sidelines is then a few sentences later you say you are waiting to btfd? you just made my point for me.

NugginFuts's picture

I haven't joined this herd of lemmings piling into the top of a bubble. I'd hardly consider my investing tactics the same as those being used to prop up the market. Hence, how much hopium is left to smoke up in the pipe before the euphoria wears off?

BTW I don't consider a 1% sputter as a dip worth buying. Refer to previous statement. 

BarkingCat's picture

Most retail investors are sitting on the sidelines. 

Justin Case's picture

Why is Shiller so worried? This was known long ago that the markets are pumped by QE and getting worse by the day. He just needs to position himself properly if he's aware of this bubble. Everything will be awesome until it isn't. Don't be late, act now, and stop worring.

mily's picture

V (shaped recovery) is for Victory

EhKnowKneeMass's picture

Hasn't the market been overpriced since 2009? How many "experts" have come and gone making the same claim? Harry Dent, anyone? Remember the argument for/against hyperinflation in the US, circa 2010/2011? Remember everything collapsing on Shemita or 2015.75 or something?

Now, it is going to collapse in 2017 or 2018. Many of them will be saying the same thing in 2030, when DOW is between Mars and Uranus.

buzzsaw99's picture

you'll notice that he merely said he wasn't adding to his positions, not that he sold everything. even the bears ain't sellin' jack shit.


...this is a different kind of market. [/jim cramer]

Joe Cool's picture

Money on the sidelines...That's a good one!

Bryan's picture

Gosh, I hope not.  I don't want the DOW anywhere near my anus.