Tags: Financial Markets | Trump Administration | bull market | robert shiller | stocks | roaring 20s | great depression

Bull Market Has Echoes of Late 1920s, Yale's Shiller Warns

(CNBC's "Dollar Photo Club")

By    |   Monday, 01 October 2018 01:37 PM

The longest bull market in history could be showing worrying echoes of one of the greatest crashes ever on Wall Street, Nobel Prize-winning economist Robert Shiller warns.

"I look at 1929 particularly as the end of the roaring '20s and it ended in a bout of speculation," Shiller, who is professor of economics at Yale University, told CNBC.

"Between May and September of '29 the stock market went up over 30 percent in just a few months . . . We're not exactly in that circumstance, but we do have the market that has surged since 2009 so there is something of that spirit today," said Shiller, who was awarded the Nobel Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen in 2013.

Shiller warned the recent rebound in stocks after markets fell into a correction earlier this year is driven more by the bullish market narrative than hard data.

"It's something about capitalism and the advancement of people willing to take risks," said Shiller, who helped develop the widely-followed S&P/Case-Shiller Home Price Indices. "We have a role model in the White House who models that.

"Something like that has driven not just the stock market but the whole economy up in the United States and makes the United States the most expensive stock market in the world."

The period of the roaring '20s and dot-com mania of the 1990s share in some of that bullish sentiment, said Shiller, who developed the cyclically adjusted price-earnings (CAPE) ratio market valuation measure, which is calculated using price divided by the index's average historical 10-year earnings, adjusted for inflation.

"It was a similar story that was boosting the market, but they don't last forever and eventually the story starts to wilt," he said. "It's animal spirits – people's excitement about the stock market, bitcoin, and other things."

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According to Nobel Prize-winning economist Robert Shiller, the longest bull market in history could be showing worrying echoes of one of the greatest crashes ever on Wall Street.
bull market, robert shiller, stocks, roaring 20s, great depression
Monday, 01 October 2018 01:37 PM
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