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Yale's Shiller: 'A Lot of Things Are Looking Pricey'

By    |   Monday, 08 September 2014 08:57 AM

Nobel laureate economist Robert Shiller of Yale University has been saying for some time that stocks, bonds and real estate all are on the expensive side.

Nothing has happened so far to change his mind. "'Right now a lot of things are looking pricey. So don't expect good returns," he told This is Money news service.

When it comes to stocks, Shiller's cyclically adjusted price-earnings (CAPE) ratio, which is based on 10 years of earnings, stands at 26.6. That's the fourth highest level since 1881, topped only by 1929, 2000 and 2007.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

All three of those years saw stock market peaks that were followed by crashes.

"I don't say that it necessarily has to do the same thing [now], but it is cause for concern," Shiller stated. The CAPE ratio posted a record low of 6 in 1921, and it could go there, he said, though Shiller isn't forecasting that.

So what's an investor to do?

"The most important thing would be that you should save more," he argued. "Don't expect that your retirement will follow those trajectories that some advisers are telling you."

But if everyone saves more instead of spends more, it "will only weaken the economy more," Shiller explained.

"What we need is governments to get out of austerity and get into more stimulation and that will help people save more. We have to have a collective decision to expand the economy and ultimately that's what will help people save more."

Meanwhile, some investors view the weaker-than-expected August jobs report as supportive for stocks, because it could help prevent the Federal Reserve from raising interest rates quickly.

"This data . . . promotes the argument of keeping rates lower for longer," Alan Gayle, director of asset allocation for RidgeWorth Investments, told Bloomberg. "It supports [Fed Chair Janet] Yellen's more measured moving away from tightening."

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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Nobel laureate economist Robert Shiller of Yale University has been saying for some time that stocks, bonds and real estate all are on the expensive side.
Shiller, stocks, save, spend
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2014-57-08
Monday, 08 September 2014 08:57 AM
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