Professor Richard H. Thaler won the Nobel Prize in economics this week and he is nervous about the stock market, admitting he doesn’t understand it. He voiced similar tones to Bill Gross yesterday calling them ‘Fake markets’.
Professor Richard H. Thaler won the Nobel Prize in economics this week and he is nervous about the stock market, admitting he doesn’t understand it.
He voiced similar tones to Bill Gross yesterday calling them ‘Fake markets’. When a Nobel Prize winner in economics and a former bond guru are questioning the rationale of the market you know we are in extreme times. The argument against them is they are out of touch and yes the perennial ‘this time it’s different’
Professor Thaler spoke by phone to Bloomberg TV Tuesday expressing his concenrs about the stock marlet and also offered his insight on Brexit and Donald Trump.
Highlights of Thaler Bloomberg TV Interview
- “We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping,”
- “I admit to not understanding it.”
- “I don’t know about you, but I’m nervous, and it seems like when investors are nervous, they’re prone to being spooked,”
- “Nothing seems to spook the market”
- If the gains are based on tax-reform expectations, “surely investors should have lost confidence that that was going to happen.”
- He didn’t know “where anyone would get confidence” that tax reform is going to happen.
- “The Republican leadership does not seem to be interested in anything remotely bipartisan, and they need unanimity within their caucus, which they don’t have,”
- “And the president’s strategy of systematically insulting the votes he needs doesn’t seem to be optimizing anything I can think of, but maybe he’s a deeper thinker than me.”
- Earlier Tuesday on Bloomberg Radio Thaler said of Trump: “His ratio of certitude to knowledge is nearing record highs.”
Thaler also gave insight on Brexit
- “I don’t think that the leave votes were based on any implicit spreadsheet running in people’s heads — it was just like, ‘I’m angry, and I’m voting no,’”
- “It doesn’t seem to be headed in any productive direction.”
About Richard Thaler
Richard Thaler was awarded the Nobel Prize in Economic Sciences for his “contribution to behavioural economics”. We have been a student of his on incorporating insights from psychology into economic theory and policymaking. He was previously best known for co-writing the global bestseller Nudge, which explores issues such as how people can be given incentives to make more rational decisions. One could argue greed surpasses rationality as the stock market climbs to all time highs with the herd buying with no fear with the fear of missing out. A key component of KnovaWave theory is crowd behavior and interpreting it, including our inclusion of theories from Elliott, Gann and Murrey in our analysis. Thaler’s work is also a nice adjunct to Robert Prechter’s socioeconomics.