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Stock, bond and real estate prices are all uncomfortably high

Stories about the futility of trying to beat the markets deserve special attention, but they are usually not as vivid as the stories of an acquaintance murdering Robinhood or through knocking houses, and so are generally not also contagious.

To see how investor views on popular models have evolved over time, at the Yale School of Management, I led stock market confidence surveys of high-income institutional and individual investors.

Consider this survey question: “If the Dow Jones fell 3% tomorrow, I guess the day after tomorrow the Dow: 1. Would go up, 2. Go down, 3. Stay the same, or 4. No opinion.” The answer “1. Increase” generally dominates. There were a few exceptions, as in the years before the millennium bubble burst in the stock market in 2000 and during the Great Recession. But we are not in a of those negative periods. The Buy-on-Dips Confidence Index that I calculate from these responses has been consistently robust over the past few years.

The ubiquity of fantasy investment stories is found in the genre of “self-improvement” videos and books that encourage people to believe in themselves and beware of so-called experts. This supports a popular culture where people are more inclined to take risks when investing.

Since 1997, in his “Rich Dad Poor Dadbooks, Robert Kiyosaki favorably compared his childhood friend’s wealthy father, who was uneducated but had business acumen and strong motivation, with his own poor father, who was educated, politically correct and lacked in skills. faith in him. The reader is encouraged to identify with the rich father. According to Publishers Weekly, the books have sold tens of millions of copies worldwide.

Former President Donald J. Trump contributed to the speculative culture of risk taking. With Meredith McIver, he published “Trump: Think Like a Billionaire: Everything You Need to Know About Success, Real Estate and Life” in 2004. This book says, “Billionaires don’t care about the odds. We don’t listen to common sense or do what is conventional or expected. We follow our vision no matter how crazy or silly others think it is. “ More generally, such claims encourage the celebration of one’s own unrecognized – and, in many cases, non-existent – genius.

These various theories, models and manias affect the pricing of important asset classes in bewildering ways. It is difficult to predict when downward corrections could occur in the Big Three markets, but data suggests there is increased downside risk over periods of a decade or more.

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