What are they scared of?
The human race has deep underlying fears about technology and the lives their children will lead and this can be seen – in all places — in the negative yields in bond markets, Nobel Prize-winning economist Robert Shiller told CNBC.
“I think fears have been growing for years that represent the willingness of people to bid up bond prices,” he told CNBC Wednesday.
“They are worried about their future. They are worried not just about next year, they are worried about the next twenty years, the next forty years. So they are desperately trying to provide for that, they’ll even accept negative yields.” (Everyone is scared: Nobel Prize winner Shiller).
This cheerful pronouncement was made by Professor Shiller, 2:00 pm EST, January 28. No wonder the market fell out of bed that afternoon, forget the real news (which was not that earth-shattering). If shillers assertions strike a chord, maybe it is time to start honing your survivalist skills.
Shiller’s dark analysis has a silver lining
For if he is correct in his assertion that “everyone is afraid,” our current secular bull market probably has much further to go. Why? Because, bull markets are born in periods of extreme pessimism and fear. They die in periods of extreme optimism and euphoria. If Professor Shiller is correct, the game is not nearly over. It still may be in the earlier innings.
This is not to say we are immune to sharp, downward, scary moves in the market … or even a cyclical bear market. But, in the long-run, the secular bull market that began in March of 2009, may have a lot further to go before the euphoria really sets in. Distrust of the market brought about by the ’08 / ’09 collapse will not be easily banished.
Thank you Professor Shiller for validating a point I’ve made in past Kortsessions
Hyper-low rates are about fear.
But, it may not necessarily be about fear among U.S.-centric investors. It is also about fear in Germany and Japan, where their 10-year sovereigns closed at .27% and .28% yields respectively, and with Italy 1.58%, U.K. 1.34% and Spain 1.45%. Our 10-year, still at 1.64% (1/30/2015), provides the most competitive, safe yield in the world.
Are you scared yet?
P.S. The folks at CNBC, I’m sure, were absolutely delighted to get this scoop. They make a living on the negativity. Remember, ‘if it bleeds it leads.’
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