“Irrational Exuberance Exists. It Is the Primary Job of Investment Experts to Help Us All to Do Everything in Our Power to Combat This Horribly Destructive Force.”

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 ignore everything else Shiller says. ”

To clarify, you take some of what he says and spin it to say what you want it to say (not what he actually says) and then you ignore the rest. This is just a factual observation.

The title of Shiller’s book is “Irrational Exuberance,” Anonymous. Is it spin to take note of the title he gave to his book?

If irrational exuberance exists, it is a logical impossibility that the safe withdrawal rate is the same at all valuation levels. There is obviously more risk when irrational exuberance is high. So the safe withdrawal rate is lower at those times.

We need to tell people that. There were thousands of people at the Motley Fool’s Retire Early board who were planning retirements based on Greaney’s claim that the safe withdrawal rate is always 4 percent.

I pointed out the error in Greany’s study on the morning of May 13, 2002, It has not been corrected to this day. Does that not concern you? It sure concerns me.

If the Buy-and-Holders got the numbers that people use to plan their retirements so wildly wrong, what else did they get wrong? I think we should be exploring that question at every discussion board and blog on the internet. Every day. That’s how we all learn over time.

The Buy-and-Holders did a great thing advancing the idea that investment advice should be rooted in peer-reviewed research. I love them for that. But science does not stand still. We learn new things all the time. We learned an important new thing in 1981. We learned that the market is not efficient and that irrational exuberance is a real thing. We learned that stock investing risk is not constant but variable. We learned that market timing always works and is always 100 percent required for all investors. We learned that, when large numbers of investors come to believe that market timing is not required, the market becomes dysfunctional and down the road we see a price crash and an economic crisis. The good news is — we learned how to bring an end to price crashes and economic crises — by permitting open discussion of what the peer-reviewed research shows at every internet site.

Irrational exuberance exists, Anonymous. It is the primary job of investment experts to help us all to do everything in our power to combat this horribly destructive force. How do we do that? Through market timing. It is the only means available to us to get the job done. We should all be thanking our lucky stars that Shiller’s Nobel-prize-winning research showed us what we had gotten wrong and pointed us in the direction of getting it right in the future.

My sincere take.

Rob