A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

“If Shiller’s Research Is Legitimate, Then Stock Prices Are Set By Shifts in Investor Emotion. When Prices Are at the Crazy Levels Where They Reside Today, We Should Be Seeing an Insane Amount of Emotionalism. You Would Expect to See Death Threats and Demands for Unjustified Board Bannings and Thousands of Acts of Defamation and Threats to Get Academic Researchers Fired From Their Jobs, Stuff Like That. But Only If Shiller Is Right. Hmmm….”

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Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

I don’t think you would be able to get even one person to agree with any of what you just posted.

You might be right that I couldn’t get one today. But I believe that there will come a day when you won’t be able to get even one person to disagree with any of what I just posted.

It all comes down to whether Shiller’s Nobel-prize-winning research is legitimate or not. If Shiller’s research is not legitimate, then stock prices are set by the rational acts of millions of investors pursuing their self-interest and Buy-and-Hold is the ideal strategy.If Shiller’s research is legitimate, then stock prices are set by shifts in investor emotion. When prices are at the crazy levels where they reside today, we should be seeing an insane amount of emotionalism. You would expect to see death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs, stuff life that. But only if Shiller is right. Hmmm….

And what do you think is going to happen to investor emotions if millions of people see most of their life savings wiped out in a price crash? Then you would see the OPPOSITE of irrational exuberance, you would see irrational depression. What’s the opposite of death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs? Prison sentences and $500 million settlement payouts, that sort of thing, right?

We’ll see. It all depends on whether Shiller’s Nobel -prize-winning research is legitimate research or not. I believe that it is legitimate research. I’m not God. I don’t know everything. It is possible that I am wrong. But that is what I truly believe. So that is what I am going to go with.

I naturally wish you all the best that this life has to offer a person.

Shiller Believer Rob

Comments

  2. I believe that that is the board where Wade Pfau appeared recently as part of the “Ask Me Anything” series. I put up a post or two on the night before his appearance trying to see if we could reach an agreement under which I could post without disruption by you Goons. I ended up not posting during Wade’s appearance.

    I would of course love to post there. I believe that I could help aspiring early retirees and I believe that the aspiring early retirees who post there could help me. But I think that the odds are strong that there is going to be Goon disruption if I go over there and say that I believe that the safe withdrawal rate is not always 4 percent but is a number that varies depending on the valuation level that applies on the day the retirement begins. I would like to see some reassurances that that sort of thing would not happen if I posted there.

    Rob