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I saw this live on CNBC this morning. I flipped on the TV and saw that he was up next. It was definitely worth watching. He accurately predicted the stock market bubble. He accurately predicted the housing bubble.
December 31, 2010
Robert Shiller Analysis Yields 2020 Target for S&P
Using long term analysis, Professor Robert Shiller, macromarkets chief economist at Yale University and the co-creator of the S&P/Case-Shiller Home Price Index, told CNBC on Friday that the S&P 500 may reach 1430 by the year 2020.
So let's do some math on his guess.
The S&P 500 closed today at 1257.
In 2020 he thinks it will be 1430.
That's a 14% increase and it will take 10 years to achieve it. That works out to 1.3% per year. Meanwhile, he's assuming 2% inflation in his guess. I guess any real gains must therefore come from the juicy 1.78% dividends.
Someone better alert Jeremy Siegel and the pension fund industry!
ICE: Mortgage Delinquency Rate Increased Year-over-year in October
-
From ICE: ICE First Look at Mortgage Performance: Serious delinquencies hit
17-month high while foreclosure activity remains historically muted
• At 3.45% ...
3 hours ago
24 comments:
I took a look inside the Flow of Funds Accounts document tonight, specifically section F.10 Derivation of Measures of Personal Saving under Mutual fund shares.
Assuming this is a reflection of the average individual MF investor, this just might be a good time to sell mutual funds. Q3 saw 458B of MF buys!
What's interesting is Joe MF buyer wasn't a seller of MFs until Q1 2009! Ouch, that's selling low!
He sold MFs in Q2 of this year as well. He's at least showing signs of leeryness.
Tax-free and scandal-free: 5 investments for those who are leery of mutual funds
"1. Buy individual stocks. This is the simplest route....As long as you simply hold onto your shares, you won't incur taxable gains."
Taxable gains?! LOL. Remove "taxable" from that last sentence and that's just about right!
"May we all find this new decade to be far more prosperous than the last.
I'd settle for a believable illusion of prosperity at this point. Let's set the bar low! ;)"
NICE!
Happy New Year Mark!
Thanks for all you do here at your web site, I wish you nothing but the best in 2011.
1.3% per year? Maybe he is not factoring in POMOs every week over the next decade.
That performance would more closely mirror the Nikkei after their housing bust.
I usually think Shiller is overly optimistic, but not on this call.
G.H.,
"Taxable gains?! LOL. Remove "taxable" from that last sentence and that's just about right!"
The pension funds are already in a heap of trouble thanks to their overly optimistic expectations about future inflation adjusted returns.
Perhaps "a power that be" could explain how higher inflation will boost inflation adjusted returns.
It may get very ugly. But what's new?
P.S. Blogger marked several of your posts as SPAM. I didn't notice it until today. I undid its damage. Sorry about that!
Mr Slippery,
1.3% per year? Maybe he is not factoring in POMOs every week over the next decade.
Maybe he thinks that price controls only work in the short-term and that POMOs are a form of price control?
You will note that Baron Harkonnen did not say...
He who price controls the Spice, controls the universe!
Four Thousand Years of Price Control
Or perhaps Shiller covered that with his 2% inflation assumption. If 5% inflation was here instead of 2%, then perhaps he would have predicted a 4.3% growth rate instead of 1.3%. It might not alter his inflation adjusted prediction?
I will be fascinated to see how today's 1.84% real return TIPS do against his prediction for stocks.
It may be a tight race!
I'm picking TIPS but also plan to keep my spending low. Those picking stocks expecting 10% returns might be tempted to spend more than me. We'll see how that works out for them long-term!
__________________________________________________
Following the 'Cantona Appeal' for a massive popular withdrawal of cash from the banks, John Perkins and ZeitGeist BankRun Crash inspired by The Order of Malta are plotting to engineer a Crash on January 6 and take advantage of Chaos.
For Conspiracy Theorists:
1 / (911) = 611 = January 6, 2011;
Reminder the time when the crash took place on the North Tower of the World Trade Center it was 8:46 New York Time. The plane that crashed into the Pentagon did so at 9:37 am The New York Stock Exchange had just opened.
Now we know the place, the date, and the time.
☮ La Nouvelle Économie.
Instructions you must follow to insure your personal and economic security in view of the January 6 Crash. Read carefully.
The Revolution is Very Simple ... to Make.
__________________________________________________
GYSC,
We've had a "weak bar" policy since 2000. Maybe this is our new slogan?
USA: Setting the bar low with high bar prices since 2000!
C'mon down to Bernanke and Tim's crazy monetary liquidation sale. Everything must go!
watchtower,
The new year certainly started off well.
Just after midnight my girlfriend and I played Borderlands (best game for PS3 in my opinion). It had been a long time since we played it.
We then watched 4 episodes of Fringe on Blu-ray (best series on TV in my opinion).
I woke up to a day filled with sunshine (which is quite rare here in Seattle in the winter).
If this pace keeps up, inflation will average 0%, the stock market will rise 1% per day, money will mysteriously appear in my mailbox, and I'll be forced to shut down this blog and replace it with some sort of Candy Mountain tribute! Hahaha!
Here's wishing you nothing but the best as well. Maybe this works!! ;)
Eric Cantona,
From your link:
We recommend you to borrow up to your debt limit and at any rate of interest lower than 24%...
That's about the point I stopped reading.
"Here's wishing you nothing but the best as well. Maybe this works!! ;)"
My wife did make a German Chocolate cake today, so far so good!
watchtower,
We're making German cakes right here in the USA? That's fantastic news!
Hello trade surplus!
I'll try to make sure we do our part today. We've got some "french" fries in the freezer. ;)
Your lady plays video games WITH you???? No wonder you are so happy all the time, you got the best lady ever!
GYSC,
Hahaha!
My ex-wife thought it was amusing when I bought Diablo. The amusement lasted about 2 weeks and then she made me stop playing all games (cold turkey). I complied which isn't easy for a game programmer with a game addiction.
I then started watching more TV. That eventually got her goat too. She wanted to see me do something more productive with my free time.
Simply asking the server in a restaurant if they had root beer made her cry once. Ruined her entire evening. Her friends apparently glared at me for it. No joke. My choice of beverage was not acceptable.
I know this might be hard to believe but when she left me I did not beg her to return.
As a side note, probably best not to think I am wise beyond my years. I married a flight attendant. It did teach me a lot about "unintended consequences" and that high maintenance comes with a price though. It's sad really.
My girlfriend of 10 years doesn't mind about the little things though, nor do I. If she wants to spend the entire day with her horses then I'm fine with that. If I want to spend an entire day playing video games (sometimes happens!) then she's fine with that.
"I never did mind about the little things." - Maggie, Point of No Return (1993)
Mark, that's weird...
I thought I hit the preview button and then inadvertently hit the close window link thinking I had hit publish.
When I didn't see the post I just gave up, I didn't want to try to recreate the same post all over again. I guess all the thunder was gone...
Mark, quick question. I was at TD Ameritrade going over a relative's account and discussed hyper-inflation with one of their advisors.
She said gold was not necessarily going to work anymore as its no longer used as money. (Fair enough.)
Then she said that TIPS would be great (I asked her about the capital gains problem on holding them, but she said as long as you hold them to maturity, no capital gains...is that true? I believe you explained that the tax consequences would be bad in hyperinflation)
Finally, I asked if real estate would hold up well during inflation. She said no. Really? I though real estate did ok in inflation (not asking for better return, just matching inflation.)
Is she correct about real estate falling in inflation?
Coba
G.H.,
Blogger's SPAM detector needs improvement clearly. I'll try to be more responsive in the future. You were just the 2nd person to fall into its trap. I can't explain what triggered it. Didn't look like SPAM to me!
Coba,
If we hyperinflate, I think she's wrong about gold. If I knew for sure that we'd hyperinflate in my lifetime, I'd own gold even now and change my opinion about gold being in a bubble. It would be "money" again.
Then she said that TIPS would be great (I asked her about the capital gains problem on holding them, but she said as long as you hold them to maturity, no capital gains...is that true?
No. If you buy a TIPS bond outside of a retirement account this is what happens.
1. You receive interest each year.
2. The bond's value rises with inflation each year.
3. You must pay tax on the interest each year.
4. You must pay tax on the amount the bond increases due to inflation each year even though you don't get the money until maturity.
No taxes are deferred. She's wrong. You get a 1099-OID and a 1099-INT each year even if the bonds have not matured.
"Is she correct about real estate falling in inflation?"
Yes and no. In my opinion real estate would tend to rise in nominal terms but not in inflation adjusted terms (during the worst of it anyway).
The Nightmare German Inflation
Real Estate:Farmers and holders of urban property seemed to benefit if their property was mortgaged; the inflation soon wiped out the mortgage debt. However, they received no income, as noted above, since rents were frozen. After the stabilization, heavy new taxes and the urgent need for cash forced most holders to remortgage their property, often more heavily than originally, so that their gains were illusory. Still, those who held real estate throughout managed to save the capital thus invested. However, those who sold during the inflation (often through desperate need for cash) fared poorly. Because it brought no income, real estate sold at extremely low real price levels during inflation.
It is my belief that real estate would have a hard time holding its value as unemployment skyrockets. During hyperinflation, unemployment would skyrocket.
Mark,
Thanks for the answers. A couple of her other statements sent out alarm bells as well.
Coba
'If we hyperinflate, I think she's wrong about gold. If I knew for sure that we'd hyperinflate in my lifetime, I'd own gold even now and change my opinion about gold being in a bubble. It would be "money" again.'
I agree. This is my only caveat to the gold bubble thesis, which is if enough people decided gold is the way to go, through fear of their own fiat currency not keeping value, fear of no alternative fiat currency not keeping value, or maybe even through Gold commercials brainwashing them, it could happen.
Not likely, but it could happen.
This advisor also said that California bonds would be fine, and that only school board muni bonds could be defaulted on. After all, she said, the state can tax people.
This also worried me. While technically correct about the power of taxation, does she really think the politicians of the state of California couldn't find creative means to default rather than risk losing votes by raising taxes?
I guess the financial industry worldwide so far has been correct in assuming that all bonds will forever be paid off by the taxpayer at last resort, but I am not so confident.
At the federal level, at least they could print money to pay off anything they have to. California...maybe they could print scrip good for 'government services' and tax payments.
Coba
Coba,
All bets are off if we hyperinflate. That makes gold tricky.
On average, I think gold is in a bubble. I think that investors at these prices today can expect to lose money over the long-term.
However, if the USA hyperinflates then gold investors will probably do fine (even over the long-term). There would be undeniable proof that no fiat currency is safe. I think gold and silver would become money again. Gold and silver backing the world's currencies would create the demand necessary to back the current prices (and then some).
I would also add that the risk of a USA hyperinflation is not trivial within my lifetime.
The real problem is trying to figure out which outcomes need insurance. If we were to insure against all potentially bad outcomes the cost of the insurance alone would ruin us.
That said, a cashless society is what I'm predicting over the long-term.
March 24, 2007
The New Cashless Economy
Human habits and cultural attachments to the traditional idea of money may be the only hurdles that continue to prevent all payments from being made with the wave of a key fob or a ray of infrared light from a cell phone.
The blogger software must have confused "SWAG"ing for "SPAM"ing! Ha!
As someone who lost a few hundred buck when they lost my wallet, I want a cashless society with the chip implanted deep in my brain,
Anonymous,
Yikes! ;)
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