Robert Shiller: Stock Prices, “Still High By Historic Standards”

Dot-com bubblies, Housing bubbles, NOW..Stock market bubbles? so many bad news but stock prices are still too high.

When a rumor of Greece not defaulting this week causes a massive rally, we are in trouble. The markets are in completely detached from reality. I hope the EU and US never find a calculator.

cool

And I'm sure I can invent a P/E index that will say they're grossly undervalued. But, traditionally, established blue-chip stocks with a P/E ratio of 15-20 have always been considered properly priced. This goes back at least 50 years. What's changed to make this basic index unusable?

Would (seriously) love to see documented charts with the guest's call record against the result for last 5-10 yr period. Flip a coin and you'll be 50% right, and would love to see if these guys are any better than that.

Lots of them said stocks are cheap just the other week.

Is there a way to buy put options on Blodget and Task?

stocks in relation to housing are definately not caught up on the downside.

schiller is saying the housing markey is closer to the bottom than stocks in relation to the macro economy.

he is right.

stocks have furthur to drop in a form of a % than housing- that is what he is saying

Most talking heads use forward 12m estimated earnings. First, companies recovered profits by cost cutting but now most businesses are very lean so that cannot continue. Then we have the missing consumer who is over 70% of GDP. Copper is tanking too indicating world economy is slowing more. Good lck everyone.

They're both wrong. Shiller relies on past performance. One of the main caveats of investing is that past performance is not a reliable indicator of future performance. Siegel relies on future performance. Another main caveat of investing is that the future is unpredictable. Warren Buffett is successful because he looks at what a company is doing here and now, not what it did in the past or what it promises to do in the future.

Stocks might be overvalued, but there aren't many other attractive places to put your money. Treasuries and near cash investments are netting about 1%, which is less than inflation. Several company bankruptcies have shown bondholders are no longer at the front of the line. Real estate still looks risky with falling prices and rising tax mills.

He's been saying the same thing now for 15 years. Even at the March 2009 lows they were 'still high'. When are they low enough Robert?

Interesting to look back at some of the historical info ... came across an article from '94 talking about market hitting 4500.

Took decades to reach 4500, even with the boost that came from unprecedented inflows of money with the creation of IRA accounts. As 401k accounts took center stage in retirement accounts, the inflows have accelerated so much more - there's been a real upsurge in money pouring in every week/month/year. With so much inflow of money, gotta' go somewhere, stocks were bid up until the pricing is all relative -- value relative to alternative stocks available.

Stock prices often don't seem to be valued based on company itself generating income from operations to produce a return to investors over time; anyone seeing well performing companies with solid stocks selling at P/E in the 6-9 range? (Six to nine YEARS of earnings to recover the price of a share).

Stock prices seem to be set much more on the potential for trading profits -- buy now, sell in three months to three year period to someone else, let them have the decline when the markets realize and reflect company's actual performance.

Looking at historical performance against current economy, there are still many stocks with more hot air still to be released.

I guess he measures the whole s&p, even the shaky ones. But 3/4's of my portfolio has P/E's below 12 and many positions in the single digits. All pay high dividends. So I never pay attention to "experts" like mr. shiller.

The Great Linearers.

This type of analysis is only good if there have been no extraordinary events within the past 10 years. The "great" recession was an extraordinary event, where all businesses lost a lot of money. When the losses are added in, it makes low P/E look high, even though they are not. THis is another stupid metric which should just be ignored.

Stocks are a luxury good. As income and wealth disparities climb, due to government policies driven by a capitalist mandate of 15+% annual margins, where else will capitalists put their money? Whatever they choose will become a bubble. Real estate, raw materials, debt repackaging and other financial instruments, or stocks... whatever they choose will lead to nominal inflation because that's where the cash is. The real economy cannot yield 15+% returns indefinitely - only police states and genocidal resource wars can do that, and only for a little while. The cost of extreme violence and oppression is that our leaders have no legitimacy... that leads to elite uncertainty... and hence volatility of markets and bubbles.

Interesting to look back at some of the historical info ... came across an article from '94 talking about market hitting 4500.

Took decades to reach 4500, even with the boost that came from creation of IRA accoutns and unprecedented inflows on money. The inflows have accelerated, with the upsurge in 401k money pouring in every week/month/year.With so much inflow of money, gotta' go somewhere, stocks were bid up until the pricing is all relative -- value relative to alternative stocks available.

Stock prices often don't seem to be valued based on company itself generating income from operations to produce a return to investors over time; anyone seeing well performing companies with solid stocks selling at P/E in the 6-9 range? (Six to nine YEARS of earnings to recover the price of a share).

Stock prices seem to be set much more on the potential for trading profits -- buy now, sell in three months to three year period to someone else, let them have the decline when the markets realize and reflect company's actual performance.

Looking at historical performance against current economy, there are still many stocks with more hot air still to be released.

There is a divergence we're seeing between stocks and real estate. US real estate continues to sink towards historical averages in price (adj for inflation) while stocks continue to rise or at least stay high. This is due to people not saving for homeownership (prob b/c its out of their reach now) and instead spending on lower hanging fruit (i.e. retail, etc...). Don't forget that corporations have international exposure to growing markets. At some point (prob now) stocks should begin to move in-line with real estate as a lower tide lowers all boats. But just b/c real estate moves down does not necessarily mean stocks or their P/E's have to move in conjunction.

Professor Siegel would have Professor Shiller selectively discard disastrous years like 2008 because they are an anomaly. I could argue that Professor Shiller should also discard 2004-2006 because the outsized profits reported by many S&P 500 companies, particularly the financials were not real. Writeoffs in 2008 and 2009 merely represented a correction, a restatement of those surreal earnings--many of them in the form of capitalized mortgage servicing rights, retained interests in securitizations, and unprovisioned spread income on construction loans. Since tossing out the anomalies--both good and bad--gets a little capricious, I would stick with Professor Shiller's methodology and just use a trailing 10-yr average.