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 say that my account is worth what it shows on the balance line. I can spend it right now and buy whatever I want for that amount.
Why did Shiller publish a book titled “Irrational Exuberance” if irrational exuberance doesn’t exist?
I believe that irrational exuberance exists. Should I mention that when safe withdrawal rates are being discussed or would it be better if I just kept it zipped?
Rob
I am looking to purchase a Rolex Datejust 41mm watch with certain style of bracelet and bezel. The MSRP is under $11k if you buy it from an Authorized Dealer. There is limited supply so you can’t just walk in a pick one up right now. Instead, you would have go out to the open market. Certain dials will cost you close to $16k if you want to buy one now. Prices for many Rolex watches have appreciated over the years, but you can’t also see scenarios with some declines that can happen when financial markets are soft.
So, if anyone is trying to determine the value of the watch (much like the value of a stock) how do we determine that value? We just look at what the market price is at that time. Anyone can make up claims telling you that it will be higher or lower in the future. Long term data shows that the value will continue to increase in future years, but Rob Bennett’s of the watch world will tell you that you will go broke with your Rolex watch.
We agree that the way to determine value is to see how the market values the thing. The problem in the stock market is that honest posting re the last 44 years of peer-reviewed research is banned at every internet site. Without access to discussions of what the peer-reviewed research says, the market is not able to function properly. In ordinary circumstances, participants in a market act in their best interests. It’s obviously not possible for stock investors to do this for so long as honest posting is prohibited at all sites,
This is one of the reasons why I am always says that we need to open every site to honest posting re the research. Once we do that, we obviously will no longer need to suffer with a CAPE value of 35
Rob
You start off with a false premise. Honest posting has not been banned and you haven’t been willing to discuss what the research really says.
If you don’t think that Shiller’s research shows that valuations affect long-term returns, what do you think it shows?
Rob
“The problem in the stock market is that honest posting re the last 44 years of peer-reviewed research is banned at every internet site. ”
Is it banned at Reddit?
Everything that I have seen over the first 23 years of our discussions tells me that it would be. If discussions at Reddit played out as they have everywhere else, 10 percent of the community would react with enthusiasm to the idea of having discussions re the last 44 years of peer-reviewed research. Another 10 percent would hate the idea intensely and would engage in abusive and in some cases criminal behavior to block it from taking place. The 80 percent in the middle would be okay with honest discussions re the research but would be generally sympathetic to the Buy-and-Hold case. They would be too intimidated by the abusive behavior of the Buy-and-Holders to insist more than one or two times that honest posting be permitted. The intensity and tenacity of the Buy-and-Hold Goons would win the day in the end.
Will that change after the onset of the next Buy-and-Hold Crisis? It might. We’ll have to wait and see.
Rob