The Latest from Bob Shiller

The co-winner of the 2013 Nobel Prize for Economic Science is generating a lot of media these days, largely in support of various business projects such as his role with a new mutual fund with DoubleLine Funds. When you see an interview with him, be sure to read his words carefully. Don’t rely on the headlines or paraphrases from the interviewer. For example, consider this interview with Reuters.

The headline indicates Shiller is concerned about a U.S. stock bubble. But in the body of the interview, and in other interviews, he’s not said that U.S. stocks are in a bubble. In fact, he’s said given today’s valuations investors still should have some money in U.S. stocks. Only in the third paragraph of his article is he quoted as saying, “I’m not sounding the alarm yet.” What he’s really saying is that in stocks you shouldn’t be a buy-and-hold investor. You need a strategy for entering and exiting the market and for lightening your holdings but staying in the market when it is pricey but not at bubble levels. In other words, focus on risk management and be prepared to change your portfolio when the market dictates.

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.