Nobel Prize economist warns of U.S. stock market bubble
BERLIN (Reuters) - An American who won this year's Nobel Prize for economics believes sharp rises in equity and property prices could lead to a dangerous financial bubble and may end badly, he told a German magazine.
Robert Shiller, who won the esteemed award with two other Americans for research into market prices and asset bubbles, pinpointed the U.S. stock market and Brazilian property market as areas of concern.
"I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets," Shiller told Sunday's Der Spiegel magazine. "That could end badly," he said.
"I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable," he said, describing the financial and technology sectors as overvalued.
He had also looked at "drastically" higher house prices in Rio de Janeiro and Sao Paulo in Brazil in the last five years.
"There, I felt a bit like in the United States of 2004," he said, adding he was hearing arguments about investment opportunities and a growing middle class that he had heard in the United States around the year 2000.
The collapse of the U.S. housing market helped trigger the 2008-2009 global financial crisis.
"Bubbles look like this. And the world is still very vulnerable to a bubble," he said.
Bubbles are created when investors do not recognise when rising asset prices get detached from underlying fundamentals.
(Reporting by Madeline Chambers; Editing by Mark Potter)
- Tweet this
- Share this
- Digg this
Trending On Reuters
India has put security agencies on nationwide alert for a militant strike in the lead-up to a visit by U.S. President Barack Obama next month, citing an assault on a Pakistani school this week as a warning signal. Full Article
Supreme Court defers verdict on Sahara plea to raise more debt on hotels Full Article
ADB trims growth forecasts for developing Asia, says India to grow 5.5 pct in 2014 Full Article