Photo: Bloomberg Television
Robert Shiller famously predicted the dot-com bubble in his book Irrational Exuberance. For his next act, Shiller predicted the housing bubble in the second edition of the same book.So, when the name “Shiller” and the word “bubble” are uttered in the same breath, people listen.
Here’s an excerpt from a new interview between Shiller and the AP’s Derek Kravitz:
Q: Do you think there’s a bubble forming in the U.S. stock market or in any other asset?
A: It doesn’t seem to me that we’re in a bubble situation as we were, say, in the 1990s. In the 1990s, there was just a general mood that we’re entering a new millennium, with Internet technology and advanced technology and America soaring. It was a bubble all over the world, really. I don’t know that we’re in that state of confidence now.
Q: Do you think any asset bubbles are forming in China?
A: China had what looks like a bubble, but the government has taken steps against it. This is another reason not to expect bubbles so much. The stock market bubble of the 1990s and the housing bubble of the 2000s were still at a time when central bankers and government authorities believed much more in free-market efficiency than they do now. The authorities are now thinking that it’s their responsibility to choke off bubbles.
Q: If you had to put all your money for the next decade in either stocks or super-safe, inflation-protected securities from the U.S. Treasury (TIPS), what would you do?
A: Stocks. They’re highly priced, and they’re risky, but they’ve had a good historic record. And last time I looked, inflation index bonds have a negative real yield.
Earlier this year, Shiller said that the record low yields in the U.S. bond markets may constitute a bubble.