“Shiller Showed Us How to Translate the Emotional Piece of the Stock Investing Puzzle Into Numbers With His CAPE Metric.”

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 would call you May 2002post as “famous”. Instead, it was one of several significant catalysts in your humiliation. You really didn’t know what you were talking about and that post just kind of highlighted it. As you have admitted, you are not a numbers guy. It is hard to know much about investing if you are not a numbers person as it comes down to math/statistics.

I am not a numbers guy. I am an emotions guy.

Stock investing does NOT just come down to numbers. Emotions play a big part in it. It was Shiller’s revolutionary insight to see that.

Shiller showed us how to translate the emotional piece of the stock investing puzzle into numbers with his CAPE metric.

Include the numbers relating to investor emotion in your calculations and you get very, very different results. The safe withdrawal rate is always 4 percent if you ignore the numbers showing the emotional effect. Include all the numbers and the safe withdrawal rate is a number somewhere between 1.6 percent and 9.0 percent, depending on the emotional component to the stock price at the time the retirement begins.

Every post that followed the post of May 13, 2002, showed that I very much knew what I was talking about. Wade Pfau would not have concluded that “Yes, Virginia, Valuation-Informed Indexing works!” had he not concluded from his 16 months of research into the issue that I very much knew what I was talking about. And you would never have risked going to prison for extortion if you were able to think of any other way of stopping these ideas from reaching the millions of investors who very much want and need to hear about them.

I think we are a good people. I think the ideas will get out. Not as soon as I wanted, for sure. Not anything close to as soon as I wanted. But I think that the ideas will get out in the days following the next price crash, when the investor psychology will change.

I wish you the best of luck with it, Anonymous. That’s all that I am able to do for you. The ideas need to get out. In an ideal world, the national debate on Shiller’s revolutionary research findings would have been launched in 1981. But we will all end up a heck of a lot better off launching it in the days following the next price crash than not launching it at all. So that’s what I am aiming for at this point in the proceedings.

Emotions Guy Rob