Shiller Voices Concerns Over Market

Prof. Robert Shiller is voicing concerns over multiple factors right now, including the high CAPE ratio (the P/E of the market using 10 years’ worth of earnings) and the increased volatility in stocks. The large downward moves recently in equities have led many investors to pay much closer attention to the market’s daily movements, especially on down days. This hyper-attention to downside volatility could result in another move down as investors sell or react to… Read More

Brightman: EM Stocks Will Most Likely Trump US Stocks Over Next Ten Years

Chris Brightman CIO of Research Affiliates explains how his firms uses stock market valuations to project long term future returns. Brightman says the best returns over the next 10 years will most likely come from emerging market equities, places like China, Russia and Brazil, where valuations look much more attractive than US stocks. Brightman utilizes the Shiller P/E, which uses ten years’ worth of earnings as the denominator, in order to predict future returns. Many… Read More

Shiller: U.S. Stocks Not That Overpriced

While many bears have pointed to the 10-year cyclically adjusted price/earnings (CAPE) ratio as a reason to avoid U.S. equities, Yale Economist and recent Nobel laureate Robert Shiller — who helped popularize the metric — says U.S. stocks still “should be a part of a portfolio”. Shiller tells Bloomberg Surveillance that, though the U.S. market is relatively highly priced according to the CAPE, it’s “not that overpriced”, and given the alternatives he thinks investors shouldn’t… Read More

Shiller On The Inscrutability Of Confidence

Confidence: It’s one of the main drivers of economies and stock markets. But as Yale Economist Robert Shiller points out in a recent New York Times column, we still know little about how it works. “There is considerable hope that the markets are heralding a major development: that Americans have lost the fears and foreboding that have made the financial crisis of 2008 so enduring in its effects,” Shiller says. “Hope is a wonderful thing. But… Read More

Shiller Talks Equity Valuations

Yale Economist Robert Shiller says he thinks stocks are priced to return less than their historical averages, but that they should still be a substantial part of an investor’s portfolio. “The important thing is that you never get completely in or completely out of stocks,” Shiller tells Business Insider in discussing the 10-year cyclically adjusted P/E ratio, which uses inflation-adjusted earnings over the past decade as a way to value stocks. “The lower CAPE is,… Read More

Valuation Expert Says Market Only “Slightly Expensive”

An expert on stock valuation who warned about the late-1990s Internet bubble says that stocks aren’t near bubble territory today.  Stocks are only “slightly expensive relative to their long-term average,” John Campbell, who is the chairman of Harvard’s Economics Department — and who was with Robert Shiller the co-author of a late-1996 paper that warned Federal Reserve officials of a stock market bubble — tells MarketWatch’s Mark Hulbert. Back when they presented their paper to Fed Chairman… Read More

Is There A Hole In The CAPE?

While some prominent strategists, including Jeremy Grantham and Robert Shiller, have pointed to the 10-year cyclically-adjusted price/earnings ratio (“CAPE”) as evidence that stocks (in particular the S&P 500) are very overvalued, Wharton Professor Jeremy Siegel says there’s a flaw in the metric.  The flaw, Siegel said at a TD Ameritrade Institutional conference, involves the 2008 year, Financial Advisor magazine reports. That year, three S&P members — Citigroup, AIG and Bank of America—lost a total of $450 billion,… Read More

Is The Market Undervalued Or Overvalued?

The stock market may either be significantly overvalued, or it may be selling near historically low levels — it all depends on whom you’re talking to and what valuation metric they’re using. And in his latest column for Canada’s Globe and Mail, Validea CEO John Reese says that means investors shouldn’t rely on one single measure of value when making decisions. “I believe strongly in using cold, hard data when investing,” Reese writes. “The problem… Read More

Bearish Case “Short of Substance”, Birinyi Says

Laszlo Birinyi, who warned about financial stocks in the summer of 2008 and turned very bullish on the market not long after it bottomed in 2009, says he isn’t buying the bears’ arguments today. “I think the bearish case is short of substance, the defensive thesis suspect and that selling has been overdone,” Birinyi writes in a column for the Financial Times. “There are some attractive — if not cheap stocks available. We are reviewing… Read More