6. Robert Shiller
Nobel-prize-winning economist Robert Shiller recently called bubbles a form of a “social mental illness.” While he’s said stocks don’t appear bubbly yet, and may have room to grow, a recent rise in his cyclically adjusted price-to-earnings ratio is a “concern.” Shiller has even gone as far to say that he doesn’t expect another housing bubble in our, or at least his, lifetime. “We’re kind of chastened by our recent experience,” he said in a recent interview.
7. Laurence Fink
Tapering of asset purchases by the Fed cannot come soon enough to calm down bubble-like markets, according to BlackRock Chief Executive Laurence Fink. “It’s imperative that the Fed begins to taper,” he told a panel in Chicago last month. “We’ve had a huge increase in the equity market. We’ve seen corporate-debt spreads narrow dramatically.” Blackrock is the world’s largest money manager with $4.1 trillion in assets under management. In fact, Fink said recently the Fed should send off Ben Bernanke in December with a “kiss” by starting the taper.
8. Bill Gross
The bond market may be bubbly but not to the extent it will likely pop, said Pimco co-chief investment officer Bill Gross recently, but that’s because the appointment of Janet Yellen to head the Fed will keep the federal funds rate artificially low for years to come. To the extent that equity markets are overheated, margin requirements can be raised to counter historically high margin debt, he said.
9. Paul Krugman
The latest from Princeton economist and New York Times columnist Paul Krugman on bubbles stems from his annoyance at former Treasury Secretary Larry Summers, who recently spoke at an International Monetary Fund research conference and got a lot of attention for ideas similar to Krugman’s. On the subject of bubbles, Krugman agrees with Summers that they may be part of the not-so-new normal, that “we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest.” Back in March, Krugman went so far to say that there’s no standard definition for them and that the growing bubble fear had something to do with a “deep hatred” for Ben Bernanke “and everything he does.”
10. Adam Parker
Morgan Stanley’s chief U.S. equity strategist Adam Parker lands somewhere in the middle. He sees risks down the road for U.S. stocks, but for the moment, he’s not all that worried about the market. “[T]here’s no doubt that the bubble is in the belief that policy makers will execute a soft-landing from higher prices than we are trading at today, and that is certainly a risk,” Parker said in a recent note. “We are currently of the mindset that the Fed will be able to communicate that tapering and tightening are different this time. On the other hand, we wouldn’t be surprised if they tapered far later than the current consensus view. Either way, the consensus view is that the monetary policy will have a huge impact on risk-taking in 2014.”
