Talking Numbers

This is why Shiller is wrong about a market bubble: Strategists

Talking Numbers

Nobel Prize-winner Robert Shiller is the latest to say the markets look bubbly. Is he right?

Yet another big name is throwing around the b-word.

Yale professor Robert Shiller, who just recently won the Nobel Prize for Economics, says he's concerned the market is starting to look bubbly. In a recent interview with German magazine Der Spiegel, Shiller says:

"I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable… Bubbles look like this. And the world is still very vulnerable to a bubble.”

Shiller joins the likes of BlackRock's Larry Fink and billionaire investor Carl Icahn in calling the markets bubbly. But, with 449 stocks in the S&P 500 up this year, is Shiller being too cautious or is he right?

"The [bubble] story never seems to go away," says Andrew Busch, editor and publisher of The Busch Update. "We keep having more and more people talk about it being a bubble, so it's less likely to be the case. Remember back in 1996, Alan Greenspan pretty much called the NASDAQ a bubble and it took five years for that to happen."

Busch thinks Schiller, Fink, and Icahn have 20/20 hindsight vision. "I think these guys are looking in the rearview mirror and they keep seeing 2008," says Busch. "What they don't understand is that we keep getting farther away from it."

There are two key factors for 2014 that will determine whether the markets become a bubble, according to Busch: increased capital expenditures and growth.

"It's really hard for bubbles to happen and crash and burn unless you have a slowing economy," says Busch. "I just don't see it happening right now."

Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, is also bullish based on the charts of the S&P 500.

"In the short-term, we have a stock chart which is quite bullish," says Ross. "In fact, it's taken right out of the pages of the textbook."

"There's nothing that says bubble here in the short-term," says Ross. "In fact, the presence of the skepticism and absence of euphoria as we push out to these fresh all-time highs suggest to me that upside remains."

To see the rest of Busch's fundamental analysis and Ross' technical analysis on the markets, watch the video above.

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