Market Currents
Robert Shiller says the current volatility in stocks is not healthy and could be setting up a...
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Tuesday, August 30, 2011, 10:35 AM ETRobert Shiller says the current volatility in stocks is not healthy and could be setting up a “substantial” decline with the potential for a "major downside" in the current fragile environment. He says housing likely will remain under pressure, the general economy probably will suffer a continuing malaise, and TIPS are his favorite investment.
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Stocks to him are ALWAYS overvalued. Either growth will be too slow or valuations are outstretched for the level of growth that is likely.
Give me a break.
For what it's worth, the times when major downside stock moves get set up are when the VIX is very low and a sense of complacency sets in. That's what we've just observed.
When volatility is high, and after a major correction, is when you go shopping.
First of all his premise is wrong, second if stocks decline - better - what is cheap will be very attractive and I am loving buying below 1100 what is worth 1400 on the S&P.
So just please keep it coming. All of you panickers out there. Keep up the good work. Sell, Sell, Sell.
E
An extremely bullish case can be made using his data from 1987 forward, 1987 was the year of the first computerized crash, an ideal starting point for modern markets.
I look at that data and I see S&P 1,500, if not this year, then next.
However, Robert Shiller is a professor of economics, not a professional investor, and that may be for the better. see www.econ.yale.edu/~shiller/ShillerDiscl...
. Many good companies are selling for good prices, cheaper than they have been for many years. The recovery, when it takes place, will likely be faster and stronger than most people predict.
I switched from being mostly short chinese frauds, to mostly long financial like banks because the value is compelling.
That said, neither Shiller, myself, nor anyone else who wastes their time coming up with predictions, can accurately forecast the stock market over the short time. Of course, that won't stop the extensive amount of time wasted trying to do so.
I also agree on the Shiller comments. Smart economics professor, but a 'not-so-good' investor. There are a myriad of solid companies selling at just rock bottom valuations. As per Ben Graham, the margin of safety in some of these names is huge. Some of the financials are predicting an equivalent downturn in housing prices equal to what we saw from 2005 to the present. No offense to the doomsayers but I will take the opposite side of that bet!