US and Brazil key areas of concern

Last updated 10:03 02/12/2013

Relevant offers

World

Graeme Hart slips a place on Forbes rich list, Bill Gates tops Greece debt crisis revives doubts about euro Brazil cracks down on protesting truckers after violence China cuts rates again in face of weak demand, deflation risk Number of new Australian millionaires hits five-year high Spiritual singer on death row with Bali nine duo How earthquakes linked to fracking are fracturing an Oklahoma community Teen earns $500,000 a year babysitting Simon Marais loses battle with cancer How boxer briefs got into America's pants

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 US stock market and Brazilian property market as areas of concern.

"I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets," Shiller told Sunday's Der Spiegel magazine.

"That could end badly," he said.

"I am most worried about the boom in the US stock market.

Also because our economy is still weak and vulnerable," he said, describing the financial and technology sectors as overvalued.

He had also looked at "drastically" higher house prices in Rio de Janeiro and Sao Paulo in Brazil in the last five years.

"There, I felt a bit like in the United States of 2004," he said, adding he was hearing arguments about investment opportunities and a growing middle class that he had heard in the United States around the year 2000.

The collapse of the US housing market helped trigger the 2008-2009 global financial crisis.

"Bubbles look like this. And the world is still very vulnerable to a bubble," he said.

Bubbles are created when investors do not recognise when rising asset prices get detached from underlying fundamentals.

Ad Feedback

- Reuters

Special offers

Featured Promotions

Sponsored Content