Robert Shiller: Stocks Are Overvalued 40%

As I have pointed out in my recently  monthly valuation articles, the market is grossly overvalued. There are individual pockets of value but they are much harder to find. When, I find stocks now that seem cheap I ask; in early 09 this makes sense but there must be a catch now, what am I missing?

Shiller predicts the S&P500 at 1430 in 2020. Jeremy Grantham, John Hussman, Seth Klarman and others also see subpar returns over the coming decades. I have also predicted real returns of low single digits.

Here is the latest Shiller PE chart (courtesy of

S&P 500 PE Ratio Chart

Professor Robert Shiller of Yale University, who wrote the book Irrational Exuberance that identified the 1990s stock market bubble, says that the price-earnings ratio that most analysts are looking at is fundamentally flawed. Stocks are far more expensive than they look relative to this year’s earnings, professor Shiller says. And, consequently, stocks are priced to return only about 3% a year over the next decade (after adjusting for inflation), versus the usual 7%.

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