I’ve put a guest post to the Balance Junkie blog titled Stock Investing Is a Political Act.
Juicy Excerpt: We all have political views. And we all have investing views. Most of us don’t think of the two types of views as intersecting. Politics is the process by which we decide where we want to go as a society. Investing is personal. It’s the process by which each of us as individuals accumulates the money he or she needs to finance his or her retirement. How I invest is my concern alone, according to this line of thought. You have no legitimate concern regarding how I invest because only I will bear the consequences of any mistakes I make in the investing realm.
Shiller is challenging all that in the words quoted above. He is saying that the plans we make as a society cannot be realized if too many of us don’t know what we are doing in the investing realm. Overvaluation is like a form of pollution. No one would say that a doctor has the right to dispose of medical waste in the ocean we all swim in. But for so long as we fail to consider the public policy implications of overvalued stock markets, this one form of pollution will continue to do harm to all of us.
Let’s be concrete. How do my decisions to fail to sell stocks when they become overpriced (and to thereby permit the overvaluation pollution to spread) harm you?