Robert Shiller: Stock Market Back to ‘Irrational Exuberance’ Levels

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The longest bull market in history we are experiencing right now may be unprecedented, but to Robert Shiller, the moment of “irrational exuberance” is coming back.

The renowned Yale economist used the title of his 2000 bestselling book to describe an overheated market on Yahoo Finance on Friday. In 1996, the phrase became well known after then-Federal Reserve Board Chairman Alan Greenspan warned that the stock market might be overvalued.

The burst of the internet bubble ended the previous record bull run from October 1990 to March 2000. Shiller voiced his concern back then, and now takes the bearish case again.

“Are you sensing a little irrational exuberance here?” Yahoo Finance’s Alexis Christoforous asked.

“Well yeah, I think so. I like that term,” Shiller said. “The reason the phrase is so famous, by the way, is not because it’s so eloquent. It’s because… the markets all over the world dropped about 4% when [then Fed chairman Alan] Greenspan said those words. People said, ‘No, this is absurd. If Greenspan uses some colorful language, should the stock markets of the entire world lose?’ It became a good word to describe the kind of craziness that happens in our markets.”

Though Shiller clarified that he was not predicting an imminent market crash.

“The market looks overvalued,” he said. “I’m glad I’m a professor and not a portfolio manager. You can’t predict these things – a boom can go on for longer than you’d ever imagined.”

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The Everything Bubble: Global Risk Assets Valued at 5x Entire Global Economy

And with such nosebleed valuations come historical comparisons stock, bond, and real estate enthusiasts are not going to like. This story always ends the same way: with a bang, then a whimper. Bubbles can inflate over a long period of time, but they only pop one way: suddenly and completely.


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