Robert Shiller, Yale economist and co-founder of the Case/Shiller Housing Index, feels the next bubble may be the stock market.

"I am more worried about the stock market than the gold market," Shiller told Fox News.

http://www.newsmax.com/StreetTalk/Shiller-Stocks-Bubble-Gold/2011/09/22/id/411960

AT the turn of the last century, it was widely accepted that American stocks were virtually certain to be good long-term investments. Now, far fewer people are confident of that.

A major reason for the earlier confidence was that in the 15 years from the end of 1984 through the end of 1999, the total return of the Standard & Poor’s 500-stock index was more than 740 percent, even after adjusting for inflation. That amounted to a compound annual real return of more than 15 percent.

At the end of 2011, by contrast, the 15-year return — from the end of 1996 — was just 3 percent. And most of those gains came in the first three years of the period. Since the end of 1999, the stock market has not come close to keeping up with inflation.

In June 1964, the real return over the previous 15 years averaged 15.6 percent a year, the highest that figure had ever been. The stock market did not begin to fall then, but it could no longer maintain the torrid pace, and the 15-year return figures began to decline. On a real total return basis, stock prices hit their highs for the era in late 1968, and by the mid-1970s were in free fall as high inflation combined with a bear market.

By 1979, an investor who bought stocks in 1964, when the market seemed to be a sure moneymaker, had lost money after adjusting for inflation, even after including dividend income.

http://www.nytimes.com/2012/01/07/business/economy/a-historical-cycle-bodes-ill-for-the-markets.html

Due to too much fast money (hedge funds, sovereign funds, prop trading) and relatively slower growth outlook globally, the stock market is not a long-term investment any more. One has to get in when things are looking pretty bad (for more sophisticated, when the risk premiums are high) and sell when things are looking good (not even too good). Unfortunately, most people save the most when things are good in the economy, and typically invest in the stocks at that time due to brain-washing by mutual fund marketing machine about stocks for the long-run. I am excluding the people who are very good stock pickers, which in my opinion is less than 1 percent of people.

Here's a clue on whether it's a good time to invest or not. When Warren Buffett writes his once-a-decade NY Times OpEd saying "buy now", it's probably a good time. Things are up 45% since that proclamation. Or if you thought he was too optimistic and waited for the bottom, you'd be up 100%.

I think most people here were busy listening to proclamations of a NYC non-bubble by posters who have trouble understanding the simplest of graphs. Some bought, others pissed away their opportunity because they were saving their cash for a downpayment trying to time a return to decent pricing. End of the day, NY RE is up only 4.5% from the absolute cherry-picked 2009 bottom, basically just inflation, despite a 30% drop in 30-year mortgages. Not nearly enough to cover the negative carry relative to renting.

Take a look here where I suggest ConEd 2 years ago because its dividend / earnings yield was crazy-high.

http://streeteasy.com/nyc/talk/discussion/19922-water-costs-going-up

It currently trades at $59. I had bought it at $35, and it has yielded $6 in dividends, so up 100%. It's a friggin' utility. Even if you had bought when I made the post, you'd be up 50%.

Hey w67th, you owe me a beer for that $50K you invested ;).

NY RE is up only 4.5% from the absolute cherry-picked 2009 bottom
At the end of 2011, by contrast, the 15-year return — from the end of 1996 — was just 3 percent

What's the difference?

The difference is that Buffett said "go long stocks" after the 2008 crash, not "go long NYC RE".

BTW, the return in S&P since then end of 1996 has been 120%, including dividends. Not sure where 3% comes from, look up Yahoo Finance. In any case, no one said S&P circa end-of-1996 was a great buy. That's when you should have been buying RE, when every saw it as a dead asset despite pretty good yields.

Buying based on the timing of someone else's recommended timing is a terrible way to invest. It's lazy and a great way to lose money. Buffet has made lots of bad calls in his life, on this one time he flipped the coin right. I suggest taping CNBC, Fox Business or bloomberg on January 1st and revisiting at year end, most gurus are wrong, and following them instead of thinking independently can be hazardous to your financial health.

Did you pick up any of that ConEd, BTW?

I didn't suggest you follow a random punter's advice feom CNBC. Sure Buffett's made a lot of bad calls in his life, but if you can't see that the coins land on his side better than 50-50, you're missing something.

Nada, Do you keep holding equities now that things are looking better on the employment front despite the risk of a large Euro Shock. My take is that we hit a peak of 1400 in SPX this year at which time, I will sell whatever I have in equities.

Yea, you can point to bonds, stocks, intl equities, small caps real estate etc and almost always find some long period of out-performance and somebody who recommended it and another long period of nonperformance. Robert Prechter , Elaine Gazarelli were geniuses until they weren't. The key to good long term performance is valuation. In the 1980's stock had good yields and low pe ratios(now they don't), that isn't to say they can't get more expensive, it just means the odds are against it a good long term move.

nada, Here is the issue with your 2009 call. Most people had no cash to invest. That is why I think you only buy stocks when things look grim and have looked so for some time. Also, do not forget to sell when thinks are looking good.

Also, 1400 SPX is only the peak. Not saying that it will hold.

Out of curiosity mercer, who do you see coming in to push the s&p 50 up 10% and which sectors do you see them favoring and why?

rs, no sector views. Unemployment situation is gettig better which means retail investor will finally start to put some money in after outflows last year. In addition, economic growth will be better than expected. However, I do not expect the market to hold the 1400 level due to long-term issues - that is just me. I only believe in equities for a 3-6 months ride.

riversider, just buy BAC and get it over with. You know you want to.

300_mercer: "Here is the issue with your 2009 call. Most people had no cash to invest."

People who bought an apartment within the few years leading up to 2009 perhaps. Afraid to invest the cash is not the same thing as not having cash to invest.

iversider, just buy BAC and get it over with. You know you want to.
-----------------
that's really funny....

My own feeling is that the public no longer trusts the stock market. Unlike a house that you can see and touch, you never know if there's fraud involved or the broker is Corzine.

rs, People not trusting the stock is correct but when they have money, marketing by mutual funds and stock market doing well brings out the greed. Re your comment about housing, buying a coop in nyc is cheaper than renting a similar quality property if your holding period is 7y+. Average rents are almost $5 a sq ft in nice areas of manhattan (Nadas alpha generation in rent excluded). Property prices for similar quality is 1000-1100 per sq ft.

I'm still holding equities with a decade-plus horizon, mercer.

"Nadas alpha generation in rent excluded."

Heh -- "alpha generation". I'm the Warren Buffett of renting. Maybe I should charge 2 & 20? Or just give it away for free like Uncle Warren?

Is alpha generation possible for buying, or is that just the purview of renting?

It certainly is possible for buying as you have to pay rent somewhere but only with a 7+ year horizon due to transaction cost. I think I am generating alpha in buying. We absolutely love the minor renovations / lighting changes we have done to our apartment all with the 2 percent rebate we got when buying from the broker. This would not have been possible in a rental. With 5/1 I/O at least 20% cheaper than renting (at average rents) a similar place assuming at 7+ year horizon without adjusting for the ability to customize the place and emotional pain of moving. We do face the risk of rates going up as the renters face the risk of rent going up.

rs, People not trusting the stock is correct but when they have money, marketing by mutual funds

---
What suckers people in are those ads with double digit 3,5,10 year past returns. Not many funds can make that claim, so I discount that.

Facebook
I rest my case

Gotta love it. S&P up 15% since RS's "call" from 10 months ago. Up 10% since his reiteration 7 months ago. Then he shows up and says "Facebook" as if that means something. Market up 8% since FB's IPO. Who the hell said to buy FB at $38???

The stock market is not in a bubble, it's still below where it was 5 years ago. It may eventually get back to bubble status, but in my opinion it would have to make new highs and that's unlikely over the next 6 months. There may be a 10% correction but that doesn't mean the market is in a bubble, just that it got ahead of itself.

It will be interesting to see what the market does when and if interest rates begin to rise a couple of years down the road.

"The stock market is not in a bubble, it's still below where it was 5 years ago."

That doesn't mean it is not a bubble... particularly when you are comparing to another bubble.

S&P is looking frothy to some degree. Only big counter I'll give is this... there is TONS of money out there with nowhere to go. Sovereign wealth funds with TRILLIONS in cash (hell, a friend is working with one that ALONE has trillions in cash). It needs somewhere to go.

And, S&P might look overvalued, but where else you going? Europe? China? Bonds?

The S&P will benefit from it being the tallest midget. Is that enough to offset the pressures of earnings projection reductions due to slowing China and Europe? Not sure. Will be an interesting next few months.

Personally, I've been taking profits on the run up (I buy each time we dip). It is more about moving to my target allocation now... and staying very, very happy that I chose stocks over RE...

Stock market is kept propped up by continuing expectation of future quantitative easing by the Fed and way above mean profit margins resulting from government deficits and consumers continuing to save.

Profits = Investment - Household Saving - Government Savings - Foreign Savings + Dividends

How does one have faith in the stock market when reports like this come out?

http://pcaobus.org/News/Releases/Pages/08202012_BD_Interim_Inspection_Program.aspx

There's no place else to put liquid money, CD's and Bonds are paying nothing so people are looking for dividends that pay 3% or higher. If interest rates ever begin to rise all bets are off and I expect a major downdraft in the market. Luckily the Fed has indicated rates will remain low for at least the next 2 years.

Of course if the broker you are choosing happens to be one of the 23 brokerages that had deficient audits done, what's the point?

"Gotta love it. S&P up 15% since RS's "call" from 10 months ago. Up 10% since his reiteration 7 months ago. Then he shows up and says "Facebook" as if that means something. Market up 8% since FB's IPO. Who the hell said to buy FB at $38???"

Excellent points...

Though I did shave some more today... (I've been overweighted with all these runups)

S&P hit a 4 year high today, bodes well for all sectors of the economy including real estate.

Those waiting for future crashes in the market or real estate will be sorely dissapointed over the next 24 months.

Wacky... why do we need a future RE crash? We're in a current crash...

"S&P hit a 4 year high today, bodes well for all sectors of the economy including real estate."

S&P doubled... and RE went *down*. Are you suddenly trying to claim they are correlated again (after all the cries how RE was different all these years). Again, wacky.

Brooksie: The guy I was thinking about; who's always waiting to scoop up the bargain real estate after the next crash. LOL!!

http://finance.yahoo.com/blogs/daily-ticker/stock-market-debt-fueled-bubble-steve-keen-121950839.html

Steve Keen weights in. Good watch.

http://finance.yahoo.com/blogs/daily-ticker/market-bit-bubbly-risks-big-movements-robert-shiller-192414777.html;_ylt=AiQVNrHR_ZUYRweMi3GEA30p2YdG;_ylu=X3oDMTE1NzRyZGk3BG1pdANEVCBJbmRleARwb3MDMQRzZWMDTWVkaWFCbG9nSW5kZXg-;_ylg=X3oDMTFpMm9iMzh1BGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25z;_ylv=3

“The CAPE ratio has predicted long-term returns,” Shiller explains. The other side of it, though, is “when CAPE gets high, the market does tend to go down. It’s a simple value proposition – what goes up must come down.”

“I don’t have an alarmist view about this,” he adds. “The market is high but it’s not horrible.”

but riversider, my cabbie told me today i must buy property and also stock because that is how i can build long-term wealth. don't u see? if u don't buy now u will be priced out forever.

nyc1234,
never listen to your cabbie, now if it was your barber.....

http://finance.yahoo.com/blogs/daily-ticker/p-500-may-fall-more-40-fall-chris-120957460.html;_ylt=Am0yPr7xxmDUkaqUxetePSgp2YdG;_ylu=X3oDMTE2ZjRqM2wzBG1pdANEVCBJbmRleARwb3MDMzUEc2VjA01lZGlhQmxvZ0luZGV4;_ylg=X3oDMTFpMm9iMzh1BGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25z;_ylv=3#more-id

Even though the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) are hovering at all-time highs, Chris Martenson, author of PeakProsperity.com and the “Crash Course” Series, is forecasting a major market correction.

Martenson predicts the S&P could fall 40% to 60% to the 600-800 level by this fall. His last major market call was in March 2008, before the financial crisis.

Riversider, I hope you didn't listen to yourself 18 months ago.

I'm taking some nice profits.