“If Irrational Exuberance Is a Real Thing (I Believe That It Is), Then There’s a Tight Connection Between High Stock Prices and Recessions.”

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

Look up the description of a recession.  It has nothing to do with the current level of the stock market price.  It is based on negative GDP.  VII investors do not own more stock.   It is owned by the top 10% who keep accumulating.  These are just simple facts that anyone can look up.

If irrational exuberance is a real thing (I believe that it is), then there’s a tight connection between high stock prices and recessions. Today’s CAPE value is two times the fair-value CAPE level. If half of the value of today’s stock market is illusory and fated to disappear into thin air at the onset of the next Buy-and-Hold Crisis, that’s trillions and trillions of dollars of spending power that are going to disappear from our economy in a short amount of time. It’s not possible for the rational human mind to imagine circumstances in which that would not bring on a recession, And, sure enough of you look back at times when stock prices reached insanely high levels, you always see a recession down the road a bit.

Not this boy.

Rob