So Richard Thaler won the Nobel Prize in economics this week.
Naturally, given Thaler’s work on the predictability of human irrationality, he’s concerned about the current state of the stock market and more specifically, about the disconnect between asset prices and geopolitical reality.
“We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping,” Thaler said, speaking by phone to Bloomberg TV. “I admit to not understanding it.”
And he goes further, noting that the disparity between market measures of volatility and the readily apparent turmoil both on the policy and political fronts is “puzzling.”
Here’s the clip:
Yes, Richard “doesn’t know about you,” but he sure is “nervous,” which is why it doesn’t make any sense for risk assets to be trading at nosebleed levels.
Well, it doesn’t make any sense until you take into account what’s actually in the driver’s seat here (i.e. central bankers and retail investors with their ETFs).
Think about that, and think about the extent to which you would call Haruhiko Kuroda and your vol.-selling neighbor “rational” and then it all makes perfect sense.
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“riskiest moment of our lives”
Our propensity to confuse “symptoms” with “causes” is ever amazing to me – even at the rarified Nobel Prize levels of intellect.
Consider that the most informed critical resource scientists think that a finite resource sustainable global human population is somewhere well below 2 billion people, perhaps even below 1 billion. These are the levels where our human population doesn’t over-run our critical resources (those absolutely necessary for us to live) and produce a biologically classic resource based species population crash.
That at the current 7.6 billion human population, that we are well on our way (and already ahead of schedule) to reach 9 -11 billion (http://www.worldometers.info/world-population/) before global human population levels off (if it actually does). Consequently, every future “moment” is riskier than the previous one, and we now live our human present – where every coming moment is potentially the “riskiest moment of our lives.”
Durwood you devil you beat me to the punch. Well said my friend.