Robert Shiller has a new source of concern.
In the first edition of his landmark book "Irrational Exuberance," published in 2000, the Yale professor of economics and 2013 Nobel Laureate presciently warned that stocks looked especially expensive. In the second edition, published in 2005 shortly before the real estate bubble crashed, he added a chapter about real estate valuations. And in the new edition, due out later this month, Shiller adds a fresh chapter called "The Bond Market in Historical Perspective," in which he worries that bond prices might be irrationally high.
Noting that interest rates (which move inversely to prices) are extremely low given historical norms, Shiller writes: "The U.S. bond market, showing such low yields, looks as it if may have gone through something of a bubble, and may collapse further, eventually."
In a Thursday interview on CNBC's "Futures Now," Shiller said that if bonds are in a bubble, it's not sort of a gleeful frenzy that the word tends to conjure images of.
For Shiller, a bubble is "a social epidemic of enthusiasm and excitement spread by word of mouth, attracting more and more investors in a market. But I don't know that the bond market is really driven by excitement. Excitement of sorts—but it isn't so optimistic. I think it's mixed with a tinge of regret about 'Why am I getting such low yields?' "