Not Just Bitcoin, Nobel Prize-Winning Economist Sees Bubble Forming In Other Markets Too

Noted economist and Nobel prize winner Robert Shiller is concerned some of the hottest financial markets could be heading towards a bubble driven by a wild-west trading mindset.

Shiller told CNBC’s “Trading Nation” he’s especially worried about housing, stocks, and cryptocurrencies.

Housing Bubble: Shiller is uneasy about the latest housing boom where home prices have hit record highs helped by lower interest rates.  

“In real terms, the home prices have never been so high. My data goes back over 100 years, so this is something,” said Shiller, co-founder of the S&P CoreLogic Case-Shiller home price index. 

According to Shiller, the home price pattern is now similar to that of 2003, two years before the slide began followed by a gradual dip over the years and ultimately crashing around the 2008 financial crisis, adding that the home prices won't come down for at least a year though.

“If you go out three or five years, I could imagine prices being substantially lower than they are now, and maybe that’s a good thing,” Shiller said. 

Shares of major publicly-listed U.S. homebuilders, DR Horton Inc DHI, Lennar Corp LEN and Toll Brothers TOL, have risen 27% to 38% year-to-date.

Stocks And Bitcoin: The S&P 500 and the Dow are up nearly 90%, and the tech-heavy NASDAQ is up just over 100% since hitting the lows in March 2020. Shiller warns inflation fears could ultimately push long-term assets lower.

Shiller believes the tech around cryptocurrency is impressive but the ultimate source of value is ambiguous and driven by narratives rather than reality. 

“I was thinking of buying them (cryptocurrency) to experience the effect. A lot of people do that actually,” he said. “I never bought Bitcoin. Maybe I should be active in that market.”

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Photo courtesy: Presidential Office Building, Taiwan via Wikimedia