Robert Shiller: "The Index I Invented Is At Levels Last Seen In 1929 And 2000"

Tyler Durden's picture

With the Shiller CAPE index having surpassed the 30x for the first time since September 2001, its creator, Nobel Laureate and Yale School of Management Economics Professor Robert Shiller is warning investors that they should be cautious about investing in such an “unusual” market.

“… the CAPE index that John Campbell and I devised 30 years ago is at unusual highs.


The only time in history going back to 1881 when it has been higher are, A: 1929 and B: 2000.”


“We are at a high level, and its concerning.”

However, the index has risen to these levels before without precipitating an immediate collapse, Shiller said. Indeed, during the history of the stock market, it has only traded at a richer valuation during one period - June 1997 to September 2001 - as the dotcom farce blew and burst. Historical data for the index is available going back to 1881.

Luckily, Shiller says, US investors at least have the option of investing in foreign markets. There are plenty of venues today that allow clients paying in dollars to invest in foreign markets.

“I think people should be cautious now. We have a high market. That doesn’t mean I would avoid it all together. One can invest abroad also, the US has an unusually high stock market compared with other countries, or one can invest in low cape sectors.”

“The world looks better and cheaper than we do?,” CNBC asked.

“Yea – well the world believes in us, I guess. I think everyone should diversify.


"One should have a little of everything if one hasn’t diversified this would be a good time to do that.”

The market’s fragility is becoming increasingly apparent as vol events become more frequent. In Thursday trading, the S&P 500 was off as much as 1.4% - sending the VIX up 50%+ before the panic-vol sellers stepped in.  The FANG stocks, which contributed an outsize portion to this year’s rally, are facing their worst week in five months.


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johngaltfla's picture

Tick, tick, tick, tick, tick.....(Ka-Boom forthcoming)

The_Juggernaut's picture

Fuck this guy.  It'll keep going up until the free money stops flowing.

Ballin D's picture

Yellen will just explain that shiller is using the wrong inputs for his own model

petar's picture

I rather bet against him, unless a special event occurs.

fx's picture

Prof Shiller, your CAPE is nice but maybe you have noticed, that it has been quite elevated for years now. So maybe one should do some research and check whether realities have changed so much as to adapt the model?
I suggest you simply subtract the respective 10 year nominal bond yields from your Cape number for the entire time series and see how that might change the whole graph. Just as a starting point...

playit's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

Stuck on Zero's picture

We're staying in the market till it's infinity. Janet has our backs.

red1chief's picture

They will continue the asset inflation until it seeps into goods inflation, then they will let some air out. Probably will take a while.

GUS100CORRINA's picture

Robert Shiller: "The Index I Invented Is At Levels Last Seen In 1929 And 2000"

My response; As long as CBs have control of the global money supply and its creation, the party can continue indefinitely. We live in a world of relativism. His model is based on absolutes which no longer exist.

I do have one observation about the graph. DEBT structures were much different in previous centuries than they are today. As a result, DEBT would most definitely alter the SHILLER CAPE RATIO graph to the point the today's level would approach or exceed the level during the 2000 time frame.

Just one person's humble opinion.

Raffie's picture

It is only CONCERNING when it pops, till them keep buying stawks.

truthalwayswinsout's picture

Get in before it goes down 90%.  Hurry Hurry Hurry..

Herodotus's picture

The best is yet to come.

order66's picture

If there's one thing that ES_F does consistently in all timeframes is retest highs and lows. There is currently only one significant low that has not been tested and that's the low from the housing crash. Would require a move into the 900-1000 level. Only reason it never did was because of CB front run panic. So there's that.

saldulilem's picture

This time is different?

Five Star's picture

And the only time since the '50s market cap has been higher relative to gdp was 2000...

Zorba's idea's picture

Imagine if we had invented QE in 29'...Hoover would have been a Hero

squid's picture

If they had tried QE in the way we do it today, there would have been civil war.


RDR did do QE, but he used gold. He made everyone sell their gold for 20USD and then devalued the USD in terms of gold to 35USD, a loss of 70% for the poor mugs that sold the government their gold. As such, FRD increased the potential USD supply by 70% overnight.


Same thing.



Professor Know Nothing's picture

Instead socialism was brought and even many "republicans" believe Roosevelt saved America. Man, what's better, money debasement or socialism. Thank you government fucks for such a quandary.

JackMeOff's picture

Why does this remind me of the game music chairs?  Damn those 1%ers.

Omega_Man's picture

wait you win a nobel award for such a simple ratio? no wonder the markets are fucked... they are run by dummies

Rehab Willie's picture

Have we run out of unicorns and pixy dust?

ebworthen's picture

Black Tulips and South Seas Company Shares!

Janet Yellen has never heard of them, so BTFD!

OregonGrown's picture

Hey Goyim.....  STFU and BTFD!

evokanivo's picture

But will it go higher!? I'll bet there is still money to be made by the BTFD crowd ...

The market can stay irrational longer than I can stay solvent if I try to short this fucker. Also, historically central banks haven't acted in unison to control markets. Is it different this time? Fuck if I know.

montresor's picture

The fire marshall just condemned the building get the fuck out

wisefool's picture

Shit made sense before 2000/911.

The great cull is comming with all the patroitic shit in the USA on 7.4. Enjoy it while you can get past a BoB Mueller investigation.

chosen's picture

Shiller predicted the collapse of the 2000 bubble.  Most economists can't predict shit.  So I respect him for that.

Gab Timov's picture

Now, I ain't no expurt on financializations, but doesn't all that Federal Reserve pumping, post 2008, distort the usual patterns? Couldn't things go a lot higher before going even higher?


GooseShtepping Moron's picture

The Shiller P/E uses a 10-year moving average adjusted for inflation, so it captures market behavior from slightly before 2008 and everything since then. To the extent that QE causes inflation, the Shiller index should reflect some of that too. But the answer to your second question is yes, things certainly could go higher, but this time I don't think they will.

All the Fed-bashers and Yellen-haters up-thread seem to be stuck on shitposter autopilot. They're just repeating the same comments they've been making for the last 9 years. Don't you guys realize that the Fed is tightening now? That Yellen does not have the market's back anymore? Haven't you guys heard that she's unwinding the Fed's balance sheet? It's been in a couple of ZH posts, you know. It's time to start changing your tune about the central banks, because Yellen is serious about tightening and this sucker's coming down.

evokanivo's picture

Maybe she is. Maybe she is just trying to maintain Fed credibility by pretending she can raise rates so people don't abandon the dollar because it's no longer a store of value (to the extent it ever was). Of course, if she does, things come crashing down and then it's probably back to QE, or at least that's my and Peter Schiff's thinking.

Dewey Cheatum and Howe's picture

Correct, all of thse models don't mean dick when there has been 15 trillion in monopoly money thrown at it.

Sonny Brakes's picture

Why is it concerning? It is what it is. If it crashes to zero and wipes out everyone's store of wealth then we'll all have to start over now won't we. Invest in the stock market they said you'll be rich one day they said. We're men and we'll get over it if and when it all does come crashing down.

cognitive dissident's picture

Seems like a smart enough guy and all, but does anybody else here have reservations about trusting a guy whose last name contains the word 'shill'?

Perhaps if he wore a nice bowtie I could trust him...

venturen's picture

Is that a unicorn farting a rainbow?

Yen Cross's picture

  Chew on these.


Investment Grade Bond

  I've spent the better part of Q-2 '17 looking at[real] GAAP earnings across all sectors, and then looked at bond issuance [debt financing] and found some astounding divergences.

  I think we're going to see a cascade event, when investors realize what is actually happening. CAPex isn't happening.

   The cost of buy-backs is getting very expensive, and the fraud/ mis-reporting is really troublesome.

armageddon addahere's picture

What do you mean by astonishing divergences?

Dewey Cheatum and Howe's picture

Shiller's index is the closest thing out there that has any sembelance of reality. And as usual the Fed is out of balance as a washing machine on spin cycle with a load of wet towels on one side and some socks and a few undies on the other.

WelfareFTW's picture

This just makes me wanna go out and buy moar US stocks.... this party aint over, not by a long shot.

chart_gazer's picture

Look at that chart closely. Nothing has ever been done like this time, every market rigged, interest rates rigged, CB's print and buy everything, money everywhere from unprecedented printing. The result will be the 2000 high taken out with no problem. draw a line from 1929 to 2000 top, extend to right, thats where we're headed, no problem.  This time is different.

Bernanke'sDaddy's picture




ludwigvmises's picture

When Barrons has a cover "SHILLER WRONG -- DOW HEADED TO 50k" then you know its time to short.

No More Bubbles's picture

Typical so-called "Bear."

"It's concerning, but it's not definitive!"

And fuck these morons saying - "This will frighten some people!" GET THE FUCK OUT OF HERE!