Author Topic: professor robert schiller  (Read 457 times)

Offline king

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professor robert schiller
« on: January 20, 2017, 01:28:53 PM »

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Donald Trump could send America into repeat of 1929 stockmarket crash, says Nobel prize winner
Professor Robert Shiller has serious concerns about Donald Trump's presidency.
Professor Robert Shiller has serious concerns about Donald Trump's presidency.

America should brace for a final blow-off surge in stock markets akin to the last phase of the dotcom boom or the "Gatsby" years of the Roaring Twenties, followed by a cathartic crash and day of moral judgment, according to a Nobel prize-winning economist.

Professor Robert Shiller said the psychological "narrative" behind Donald Trump is powerful and likely to carry Wall Street to giddy heights before the ageing business cycle finally rolls over.

"I think there will be a Trump boom for a while. Stocks look high, but they are not yet super-high. In 2000 the (Cape Shiller) price-earnings ratio was over 45 and we may see a repeat of that," he said.

Could Trump have a serious negative impact on the stock market in the USA? Only time will tell.
Could Trump have a serious negative impact on the stock market in the USA? Only time will tell.

The Cape Shiller P/E index measures the average earnings of S&P 500 equities over 10 years in real terms, and is closely watched by investors as a gauge of underlying value. It is trading at roughly 25. This is the highest level in over 130 years, excluding the two anomalies of the late 1990s and 1920s.

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The US property market is recovering, but the mood among buyers is nothing like the subprime fever in 2005, when median expectations were for price rises of 12 per cent a year for the next 10 years, and the spread above mortgage rates was 6 per cent.

Donald Trump will be inaugurated at about 6am NZ time, on Saturday.
Donald Trump will be inaugurated at about 6am NZ time, on Saturday.

"Today the spread is zero," Professor Shiller said, speaking at the World Economic Forum in Davos.

He believes the prospect of a Trump White House is a "horrible nightmare", calling the incoming president a dangerous adventurer bent on a nuclear arms race that will draw the world into a spiral of conflict. But nobody, he said, should underestimate the Trump effect on the "animal spirits" of Americans.

"Trump is a phenomenal motivational speaker. He may not be my taste, but he is telling people that it is alright to flaunt your wealth, that it is OK to do whatever you want," he said.

Professor Shiller said recessions happens because of a collective "narrative", a story that takes hold. People spend less. They postpone buying a new car. Small businesses put off hiring. The effect snowballs into a serious downturn.

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Professor Shiller, who won the Nobel Prize in 2013 for his "analysis of asset prices", said the economics fraternity has neglected the potent effects of human mood and social shifts in driving the ups and downs of financial cycles.

Dry modelling of fiscal and monetary data miss the force of these tidal waves, he suggested, which is why central banks and economic authorities are so often caught flat-footed. However, he added that the Trump effect will by reinforced by his Keynesian stimulus of tax cuts and infrastructure spending.

Professor Shiller believes Trump will not allow the US Federal Reserve to hold back his boom by raising interest rates. "Janet Yellen will be gone by the end of the year and then he will 'pack' the Fed." He compared Trump's ideology to the now forgotten Calvin Coolidge, president from 1923 to 1929, remembered only for his laissez-faire views and declaring that "the business of America is business".

Trump's "go out and spend" mantra may entice, but does the economist feel it will sate voters long-term? "Their support is not unconditional.

"What happened after 1929 is a sobering tale. American attitudes changed abruptly. People cut back on spending and this compounded the effects of the depression. There was a collective repudiation of what had gone before.

"There is a strong narrative to the Great Crash. People saw it as the day of judgment on the 1920s, and I think we could see a repeat of that. The public will reject Trump's policies and what he stands for," he said.

Professor Shiller's Nobel colleagues doubt the Trump era will produce a boom at all. One after another lambasted him at the annual meeting of the American Economic Association last week, warning that his policy mix will add little net stimulus, further entrench inequality, and risk a calamitous trade war. So far the markets do not seem to agree.

 - The Telegraph

Offline king

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Re: professor robert schiller
« Reply #1 on: February 25, 2017, 07:06:20 PM »

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Offline king

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Re: professor robert schiller
« Reply #2 on: June 05, 2017, 06:55:06 AM »

Stock market will rise 50 percent, esteemed economist says
By Jonathon Trugman June 4, 2017 | 2:04am
Modal Trigger Stock market will rise 50 percent, esteemed economist says
Robert Shiller Getty Images

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It’s not very often that a Nobel Prize-winning economist who is known for his bearish calls turns extremely bullish.

Last week, professor Robert Shiller of Yale, who called the housing collapse 10 years ago, proclaimed that stocks could rise another 50 percent in the next few years based upon his latest research. Meaning Dow 30,000!

That got the attention of many folks, especially the Wall Street analysts, many of whom don’t understand this market.

Shiller accurately saw the housing bubble and predicted that it would end very badly, as it did. He also co-developed the S&P/Case-Shiller index, which is a benchmark to measuring housing prices around major US cities.

What many may not know is that in the 1990s he developed a stock price measurement ratio called the cyclically adjusted price-to-earnings (CAPE) ratio for stock valuations.

The CAPE ratio measures stock prices in relation to long-term earnings and inflation. At current levels, Shiller’s own CAPE ratio is not flashing a buying opportunity, which makes his call even more interesting.

In fact, based on his CAPE ratio, stock prices are actually high right now. However, like many of the other ratios out there in academia and on Wall Street, interest rates are not weighted in it.

In fact, Shiller pointed out that the CAPE ratio he trusts is actually expensive now at 29. Its average is 17.

“I would say, have some stocks in your portfolio. It could go up 50 percent from here. That’s what it did around 2000 — after it reached this level, it went up another 50 percent.”

In 2000 the economy was about 12 months away from the top of the internet bubble, which also ended badly.

The key to Shiller’s call is President Trump’s tax policy. “If factors go right and there are tax cuts for corporations, it’s not that hard to understand.”

So making a great short call followed up a decade later by a great long call would give Shiller an A+ in my book. And make investors a pretty penny along the way.