Tags: shiller | market | overvalued

Shiller: Market Overvalued, but Hold Stocks

By Ellen Chang   |   Thursday, 29 Oct 2009 04:33 PM

Robert Shiller, the Yale economist, believes the market is overvalued, but he is not advocating dumping stocks.

Shiller, who is well-known for predicting both the housing and Internet busts, said he does not think there be another bout of “irrational exuberance” taking place, he told Yahoo! TechTicker.

“Given the economic situation, I’m worried about the stock market — both of them, stock and housing market. These booms we’re seeing now can’t be trusted to continue,” he said.

Shiller is also wary of another bubble occurring.

“During a real boom it becomes a whole culture. . . where we are all starry eyed optimists,” he said.

“I just don’t see that coming back in this environment.”

The housing price gain may not last long, he told Reuters Television.

"The prominent fact that we are seeing with this data is that home prices are just zipping up. It is entirely possible that even with the bad news we are getting, home prices could start a major increase. It is a time of great uncertainty," he said.

Interest rates may start rising again with intervention from the central banks, said Art Hogan, chief market strategist at Jefferies & Co., MarketWatch reported.

"They will at some point in time both stop quantitative easing, or the direct buying of Treasuries, and gradually tighten interest rates," he said.

The economy would need to show signs of more improvement before interest rates are boosted, he said.

"The Fed has a pretty good picture of the economy, and can usually see around the corner," said Hogan.

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