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Stock market will rise 50 percent, esteemed economist says
By Jonathon Trugman June 4, 2017 | 2:04am
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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.

Well it took me a little time to find the original article because it appeared in the NY Post rather than the times. What Shiller said is that it could go up 50% because that is what the market did in the last 6 months prior to the 2000 peak--which was followed by crash of the DJIA going from 16,700 to 10,300. Shiller's quote is not historically accurate, by the way, based on the DJIA.

If you are buying US equities now, you have got to be thinking market timing, rather than long term investing in an under-priced asset class

Get in, stay in, keep 15% - 20% in cash. When the market tanks, you use the cash to buy now that things are "on sale" and ride it back up and recoup your losses + some. Works best when you start young.

He's basically saying that a market in a bubble CAN go up longer than people expect. But to me, that's playing chicken.

I'd just go long on pork bellies, you never loose on those. Everyone loves bacon!