Nobel Laureate Robert Shiller, who famously predicted the 2000 and the 2007 stock market crashes, says this time that bubbles are everywhere, including stocks, bonds, and housing.
He told investors in Los Angeles: “There’s no place to go. You just have to ride it out. You invest even though you expect the price to decline.”
The economics professor at Yale University said he sees “bubbles everywhere,” adding that “you get… in a situation where you know it’s going to decline, but you still saved enough to hold you over; you have no choice.”
The warning comes on the 90th anniversary of the stock market crash of 1929. In the aftermath, the US and the rest of the industrialized countries spiraled into the Great Depression, the worst and longest economic downturn in the history of the Western industrialized world, lasting until 1939.
Shiller said he expects just 4.4 percent average annual returns in US stocks over the next 30 years. He also raised concerns over bonds, which continue to be one of the hottest asset classes going as investors seek safety.
“It [the bond bubble] seems to be related to people not paying enough attention, thinking through the simple logic… this can’t keep going and it’s going to end badly,” he said. “These things may sink at some point.”
Talking about the housing market, the economist said it is in a bubble phase. “It’s like 2005 again… San Francisco and L.A. are already slowing down,” he said, explaining that’s a “bad indicator,” as those markets have been going up for years.