Robert Shiller's advise on how to prevent a 1929-like stock market crash

It's a comparison no one wants to hear — that this stock market bears striking similarities to that of 1929.The observation is coming from Nobel Prize-winning economist Robert Shiller, who's been arguing valuations are extremely expensive.

"The market is about as highly priced as it was in 1929," said Shiller on Tuesday. "In 1929 from the peak to the bottom, it was 80 percent down. And the market really wasn't much higher than it is now in terms of my CAPE [cyclically adjusted price-to-earnings] ratio. So, you give pause when you notice that."

"It's not just a matter of low interest rates, it's something about the American atmosphere. It's partly the Trump atmosphere. Investors love this. I can't exactly explain – maybe it has something to do with prospective tax cuts."

Unlike 1929, Shiller points out there's not much talk about people borrowing exorbitant amounts of money to buy stocks. Plus, he notes there's now more regulation.

The Dow hit both an all-time intraday high and close. It's now up 22 percent since Donald Trump won last November's presidential election.The S&P 500 and Nasdaq both closed at fresh record highs on Tuesday, too.

Source: Bloomberg Pro Terminal

Trader Velizar Mitov

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