{"id":38596,"date":"2018-10-02T10:32:49","date_gmt":"2018-10-02T15:32:49","guid":{"rendered":"http:\/\/olduvai.ca\/?p=38596"},"modified":"2018-10-02T10:32:49","modified_gmt":"2018-10-02T15:32:49","slug":"bubbles-and-zombies","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=38596","title":{"rendered":"Bubbles and Zombies"},"content":{"rendered":"

Bubbles and Zombies<\/a><\/h3>\n
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They say nobody rings a bell at the top of the market. But whether this is the top or not, two prominent market observers and historians, Robert Shiller and Edward Chancellor, are expressing concern.<\/p>\n

First<\/a>, Shiller warns readers not to take big increases in earnings too seriously because earnings are volatile.<\/p>\n

Everyone knows that stock prices have risen dramatically since 2009. A $100 investment in the S&P 500 in 2009 has grown to nearly $400 at the end of August 2018. But Shiller reminds us<\/a> that earnings have grown dramatically too. In fact, \u201creal quarterly S&P 500 reported earnings per share rose 3.8-fold over essentially the same period, from the first quarter of 2009 to the second quarter of 2018,\u201d according to Shiller. Prices, in fact grew a bit more slowly than earnings since the end of the crisis.<\/p>\n

So should we think stocks are reasonably priced since earnings have grown at the same pace as prices? Not so fast, Shiller says. Earnings, the difference between two other data sets \u2014 revenues and expenses, are volatile, and cyclical. Rapid rises in earning are often followed by a return to long term trends or subpar levels. Such episodes have occurred more than a dozen times in U.S. stock market history.<\/p>\n

Earnings can grow dramatically from things like \u201cpanicky demand\u201d for U.S. goods from Europeans at the beginning of World War I. This led to political calls for \u201cwealth conscription\u201d or a heavy taxation on war-related profits. At that time stock prices didn\u2019t follow profit advances as investors seemed to realize those gains would be short-lived.<\/p>\n

In the \u201cRoaring \u201820s,\u201d however, emergence from a \u201cwar to end all wars\u201d and a spirit of freedom and individual fulfillment spurred stock prices by Shiller\u2019s lights. And this, of course, led to a crash at the end of the decade.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Bubbles and Zombies They say nobody rings a bell at the top of the market. But whether this is the top or not, two prominent market observers and historians, Robert Shiller and Edward Chancellor, are expressing concern. First, Shiller warns readers not to take big increases in earnings too seriously because earnings are volatile. Everyone […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1799,22053,19492,15470,5821,2442,903],"class_list":["post-38596","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bubbles","tag-edward-chancellor","tag-john-coumarianos","tag-real-investment-advice","tag-robert-shiller","tag-us-stock-market","tag-zombies"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=38596"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38596\/revisions"}],"predecessor-version":[{"id":38597,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38596\/revisions\/38597"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=38596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=38596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=38596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}