It’s not logic that persuades the human mind. It’s repetition.

There was a time when people accepted slavery. No logical case might be made for it. But people saw it practiced each time they looked around on the world surrounding them. The message received by their brain was that “that is normal.” People imagine what they see.

Once I was a boy and my family would visit the families of friends of my parents, there can be ashtrays within the living rooms. Even individuals who didn’t smoke provided ashtrays for visitors who did. It will have been considered impolite to not accomplish that. I cannot remember the last time that I visited a house during which there have been ashtrays placed within the lounge. There was a time when it was a thing that was done. Now it’s a thing that shouldn’t be done.

The proportion of people that smoke has dropped over those years. It’s not a coincidence. Each time someone saw an ashtray in a lounge, a message was sent to his or her brain that “that is normal, that is how life is lived.”

Higher stock prices are dangerous

There was a headline the opposite day reporting that it was “An excellent day for 401(k)s: S&P 500 and Dow hit recent highs.” That’s not day in my book. The CAPE value on the morning of that day was within the low 30s, near the CAPE value that brought on the Great Depression. It after all rose in consequence of the brand new highs. So dangerous stock prices became much more dangerous.

I understand that almost all investors of today are Buy-and-Holders and that to the Buy-and-Hold mind a rise in stock prices is the results of rational investors making rational decisions. To that way of pondering, a price increase is at all times justified and is at all times excellent news because higher stock prices signify a stronger economy. That’s not how a Valuation-Informed Indexer looks at things. We imagine that stock prices higher than those justified by the economic realities (that’s, prices higher than those who generate a CAPE value of 17) are bad news. Irrational exuberance misleads investors re the worth of their stock portfolio and places the stock market in peril of a price crash and the financial system in peril of a collapse when trillions of dollars of consumer buying power disappear.

So it’s a matter of some controversy whether that day’s price increase was indeed excellent news or not. A more fair journalistic account would have added “in accordance with the Buy-and-Holders” following the claim that the day of price increases was “ day.” I appreciate that in today’s world (a world with a CAPE value within the 30s it’s asking so much to expect such language to seem following such a press release. Buy-and-Hold pondering is omni-present at times of hgh stock prices. We’re all saturated in Buy-and-Hold pondering today.

That’s an issue.

An obvious truth

Repetition persuades. The concept that high stock prices are good stock prices shouldn’t be an obvious truth. It’s a contention often repeated by individuals who imagine in a single particular model for understanding how stock investing works. The unlucky thing is that claims just like the one made within the news account are made in so subtle a fashion that few investors are even aware that a contentious claim is being advanced. After all high stock prices are good stock prices! Has anyone ever questioned it?

Someone has questioned it. The guy who questioned it was awarded a Nobel prize for publishing the research raising the questions. So the questions are serious. But they usually are not taken seriously enough to even be mentioned when claims that top stock prices are good stock prices are advanced. Such claims are iterated time and again and all over again in such subtle ways in which investors usually are not even aware that they’re being advanced. Which implies that the possibilities that investors would scrutinize those claims are very small.

What if we added a line to portfolio statements during which we reported what an individual’s stock portfolio is price after the official number was adjusted for the quantity of irrational exuberance present within the stock price on the time the portfolio statement was issued? That may cause people to take into consideration what Shiller showed in his 1981 research. That may cause people to be less completely satisfied with unjustified price increases and more realistic of their financial planning. If that recent line were included with each monthly portfolio statement, Shiller’s breakthrough insight can be presented to the investors who have to develop into aware of it time and again and all over again.

Like the best way that the Buy-and-Hold way of enthusiastic about stock prices is presented to them today.

Rob’s bio is here.