ROBERT SHILLER: STOCKS AND REAL ESTATE REMAIN GROSSLY OVERVALUED
15 June 2011 by Cullen Roche
8 Comments
Robert Shiller is certainly sounding gloomy these days and that’s generally bad news considering his positive track record of finding overvalued assets and warning investors in advance. This morning Dr. Shiller sat down with Aaron Task and Henry Blodget to discuss why he believes equities are 40% overvalued and why housing could fall another 10-25%.
On equities:
On real estate:
Source: Yahoo Finance
Shiller is a smart neutral observer. Most definitely not in the permabear camp. He had a nice editorial in the nyt last Sunday
Gotta love Gary Shilling! I remember when he went head to head with some guy on Bloomberg satellite radio over housing having another leg down and that was months ago.
His newsletter is priceless:
http://www.creditwritedowns.com/2011/05/still-home-sick.html
A. Gary Shilling Agrees:
http://www.creditwritedowns.com/2011/05/still-home-sick.html
LT average is questionnable. MA makes more sense to me, just a feeling…anyway i’ll just go for an extra 5% decline based on MA and shiller PE (and rough approximation)…then i’ll rethink !
Most high quality large caps haven’t been as cheap as now in at least 3 to 4 decades with (forward) P/Es only seen at bottom of big bear markets. Earnings may correct in this cycle but many of them have lots of cash to buy back and also are still growing earnings at double digit growth this year. So I guess it depends on where you are looking.
“Most high quality large caps haven’t been as cheap as now in at least 3 to 4 decades with (forward) P/Es only seen at bottom of big bear markets.”
High Quality Large caps are cheaper than the market as a whole, but the idea that they are the cheapest in three of four decades is just not true. They are not anywhere close to as cheap as in the early 1980′s. To do so would require the S&P 500 to be around 450.
Nor can forward P/E’s be compared to trailing P/E’s anyway as you seem to be doing. Furthermore those low P/E’s at the bottom of bear markets were on extremely low profit margins while today’s are near all time high’s. At best High Quality is reasonably valued, it is not cheap. Less charitably it is the prettiest sister at the ugly girl ball.
Robert Shiller speaks the truth! The key issue in property investment is the underlying value of the property asset, as measured by the property’s gross rental yield. Assessing property gross rental yields nationally and internationally is the key.
Now we are watching someone that knows what he’s talking about