Barring a big decline in the next three days, the stock market is on track for its best first quarter since 2008 and back-to-back quarterly gains of more than 10%.
The market's performance in the past three and six months -- much less the past three years -- has generated a lot of chatter about stocks having run "too far, too fast." In addition, a string of IPOs by social media companies and Apple's incredible surge have spurred whispers of another "bubble" brewing in stocks.
To be sure, it's a long way from 1999 -- when scads of money-losing dot.coms went public with outrageous valuations and "everybody" was getting rich day trading. Still, there is "a chance of another tech bubble," according to one of the world's foremost authorities on the subject: Yale Professor Robert Shiller.
"Technology has a fascination...it's part of our sense of the future," he says. "We've got an exciting thing going. All the new gadgets are just so breathtaking, there's going to be huge fortunes made. That kind of excitement I do feel in the air."
Having said that, Shiller is not predicting another tech bubble, far from it. He says predicting bubbles is impossible: "It's like predicting an epidemic. It depends on the contagion of emotions and of ideas."
"Efforts by governments to solve the underlying problems responsible for the  crisis have still not gotten very far and the 'stress tests' that governments have used to encourage optimism about our financial institutions were of questionable thoroughness," Shiller writes in the preface to his latest book: Finance and the Good Society. "As I write in 2012, we certainly do not believe that [the crisis] is over yet, and the worst may be yet to come."
The idea 'the worst is yet to come' seems totally contradictory to the potential for another bubble where 'fortunes are made'. But Shiller believes the 1932-1937 scenario -- when stocks surged 266% despite the economy's continued struggles -- remains a model for the current era. It also speaks to the idea that extreme outcomes, i.e. the "fat tail" events, will occur with increased frequency, as PIMCO's Mohamed El-Erian predicts. (See: New Year, Really Big Threats: 'Fat-Tail' Risks Rise)
Putting it all together, plus a dash of Shiller's cyclically adjusted P/E ratio showing stocks above their historic average (i.e. "not cheap") and Shiller remains optimistic, but not wildly so.
"Nobody knows the future and it looks a little pricey to me [but] I would still put money in the stock market right now," he says. "But not overwhelmingly. This is a time to be reasonably diversified."
- Robert Shiller
- stock market