Shiller Thinks You Are Scared & What Does The Dow Transports Index Tell Us

Dow Transport2

Nobel Prize winning economist Robert Shiller thinks you are scared and that’s the primary reason the yields are collapsing. Scared of what might you ask? Well, the future, AI, terrorist, etc…basically everything. Everyone is scared: Nobel Prize winner Shiller

“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.”

That’s quite an analysis. I have a different view. The yields are collapsing and the yield curve is flattening because quite a few smart investors see a massive asset bubble in equities, deflation, another ultimate round of QE, a big upcoming recession and at least a double bottom in a 10-Year Note. I don’t think they are scared, on the contrary, I think they are smart.

Also, quite an interesting way to think about what the Dow Transportation Index is doing, its impact on the Dow theory and the overall economy can be found here. What the oldest stock market index is telling us

The author is absolutely correct. Despite the oil being down over 50% over the last 6-9 months, the Dow Transports Index had failed to move higher. Even though the companies within the index should be the primary beneficiaries of cheaper oil. This brings up a number of questions.

First, will oil prices have a net positive impact on our overall economy, just as most financial analyst believe? Thus far, the Dow Transportation Average is saying NO. Second, the Transports tend to be a leading indicator of economic downturns. Could it lack of enthusiasm for lower oil prices be considered as an ominous sign for the overall US Economy and the stock market? I think you know the answer to that.