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Questions for Bob Shiller?


merkhet
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Have you modified your views of Eugene Fama's work in any way, since the time of sharing the prize?

 

Is market inefficiency and investor irrationality all-or-nothing?  Or are markets sometimes efficient, and investors (as a crowd) sometimes rational (like in the short-term, or in the long-term)?

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I get to introduce Bob Shiller at the National Press Club tonight. Anyone have any questions they want me to ask during the Q&A?

 

ARE WE IN A BUBBLE YET!

 

And if we are what asset class?

 

Assuming you meant equity markets. Not quite. Valuations are certainly high, but it's not quite irrationally so yet.

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Is it inevitable that we will have another bust or could things just slow down and self correct without a major bubble top and bust bottom?

;)

 

He didn't quite answer this about equity markets, but he addressed this in terms of bond markets. He stated that in the history of the bond markets from 1850s or so, there hadn't been a serious crash of any sort in the bond markets -- nothing on the level of equity markets. The worst dip he could find was a blip during 1982 when Volcker hiked up interest rates severely to break the back of inflation -- and even then bonds dropped 12%. Shiller thinks that Yellen is unlikely to do more damage than Volcker.

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Have you modified your views of Eugene Fama's work in any way, since the time of sharing the prize?

 

Is market inefficiency and investor irrationality all-or-nothing?  Or are markets sometimes efficient, and investors (as a crowd) sometimes rational (like in the short-term, or in the long-term)?

 

He falls in the sometimes efficient and sometimes irrational crowd.

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Have you modified your views of Eugene Fama's work in any way, since the time of sharing the prize?

 

Is market inefficiency and investor irrationality all-or-nothing?  Or are markets sometimes efficient, and investors (as a crowd) sometimes rational (like in the short-term, or in the long-term)?

 

He falls in the sometimes efficient and sometimes irrational crowd.

 

Thanks.  I wish I could be in a small roundtable discussion with him.  Judge Sweeney next?  Or is she disqualified for being a non-Yalie?

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Is it inevitable that we will have another bust or could things just slow down and self correct without a major bubble top and bust bottom?

;)

 

He didn't quite answer this about equity markets, but he addressed this in terms of bond markets. He stated that in the history of the bond markets from 1850s or so, there hadn't been a serious crash of any sort in the bond markets -- nothing on the level of equity markets. The worst dip he could find was a blip during 1982 when Volcker hiked up interest rates severely to break the back of inflation -- and even then bonds dropped 12%. Shiller thinks that Yellen is unlikely to do more damage than Volcker.

 

Thank you merkhet!

:)

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Have you modified your views of Eugene Fama's work in any way, since the time of sharing the prize?

 

Is market inefficiency and investor irrationality all-or-nothing?  Or are markets sometimes efficient, and investors (as a crowd) sometimes rational (like in the short-term, or in the long-term)?

 

He falls in the sometimes efficient and sometimes irrational crowd.

 

Thanks.  I wish I could be in a small roundtable discussion with him.  Judge Sweeney next?  Or is she disqualified for being a non-Yalie?

 

Oh, believe me, if I could have a small roundtable discussion with Judge Sweeney, I'd be all over it -- pending a determination from my lawyers on the legality of such a talk, lol.

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I also got the chance to ask Profess Shiller about negative rates.

 

He mentioned that he was not too worried because they're only a little bit negative. He'd be more worried if they were more negative. In his estimation, he figures that it's a question of "well, what else are you going to do with your money?" His thought experiment is to imagine that you have $10 million, and your banker calls you up and says, "your rate is going to be negative." What are you going to do? Withdraw your money and put it in cash? That's a lot of suitcases to stuff under the mattress. Are you going to invest it in European equities? Well, most people are terrified of how Europe is doing economically, so they'd rather not -- i.e. it's a matter of taking a guaranteed very small loss (negative rates) versus gambling and possibly taking a very large loss in the markets.

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