Current market projections are diverse.
Nobel Laureate in economics Jeremy Siegel says he is still not concerned with valuations and has upped his previous projection of 18,000 for the Dow by year-end to “possibly 19,000″.
However, Nobel Laureate in economics Robert Shiller is very worried, noting that the market is 65% overvalued based on the Shiller CAPE10 P/E ratio, the market’s main fuel now being ‘irrational exuberance’.
Newsletter writers and retail investors are very bullish, while corporate insiders and famous billionaire investors are increasingly pessimistic.
For instance, George Soros has significantly increased his positions in put option bets against the S&P 500, while Warren Buffett is holding a record amount of cash.
Billionaire investor Sam Zell says, ‘Something has to give here. The stock market is at an all-time high, and economic activity is not.’
Peter Schiff, economist and CEO of Euro Pacific Capital, says, ‘The 2008 market collapse was not the real crash. The real crash is coming.’
Jim Paulsen of Wells Capital Management, one of the biggest bulls during the last five years, is now telling clients to ‘shift out of U. S. stocks and into international markets.’
They are not only concerned about the high market valuation and age of the bull market. They speak of how the extremely aggressive actions of the Fed over the last five years resulted in only an anemic economic recovery. Yet the market, always looking ahead, will soon have to begin anticipating those actions being reversed; the unloading of the unprecedented $4 trillion in mortgage-back securities and U. S. Treasury bonds on the Fed’s balance sheet, raising the record low interest rates back to normal, and so on.
This post was published at FinancialSense on 09/05/2014.