Money management has been a profession involving a lot of fakery - people saying they can beat the market, and they really can't.
Interpretation
The quote suggests that many in the money management profession exaggerate their abilities to generate profits.
Robert J. Shiller highlights the prevalence of dishonesty and overconfidence in the money management industry. He implies that many professionals claim to have the ability to outperform the market, but in reality, such claims are often unfounded and misleading, emphasizing the importance of skepticism in financial advice.
In practice
This quote is relevant for discussing ethical practices in finance during a seminar.
Those on the downside of rising economic inequality generally do not want government policies that look like handouts. They typically do not want the government to make the tax system more progressive, to impose punishing taxes on the rich, in order to give the money to them. Redistribution feels demeaning. It feels like being labeled a failure.
Speculative markets have always been vulnerable to illusion. But seeing the folly in markets provides no clear advantage in forecasting outcomes, because changes in the force of the illusion are difficult to predict.
That's the world we live in: when it comes to economics, people have emotions; it's not like chemistry or physics.
We should not be focusing on quick solutions. The really important concern for policymakers everywhere is to prevent disasters - that is, the outlier events that matter the most.
If we wait until income inequality is much more severe, we will have a whole class of new superrich who will probably feel entitled to their wealth and will have the means to defend their interest. That's already gone far enough. We shouldn't let it become more extreme.
I think that a lot of people in all walks of life have the impression, of course, that, 'I specialize in something. I can't - I don't have the time to read other things. I'll just go to pure entertainment when I'm relaxing, and then I'll come back to my pure specialty.' That produces - that attitude produces idiot savants, unfortunately.
If you hope to have more money tomorrow than you have today, you've got to put a chunk of your assets into stocks. Sooner or later, a portfolio of stocks or stock mutual funds will turn out to be a lot more valuable than a portfolio of bonds or CDs or money-market funds.
Remember that the stock market is manic-depressive.
The foundation of a financial fresh start actually has nothing to do with money or specific financial dos and don'ts.
Complexity and interconnectedness matter as much as size in assessing risk in banking.
I like Burton Malkiel's 'A Random Walk Down Wall Street.' He comes to the same conclusion that I do - that indexing is the way. My 'Little Book of Common Sense Investing' says pretty much the same thing.
Not yet have I found any better method to prosper during the future financial chaos, which is likely to last many years, than to keep your net worth in shares of those corporations that have proven to have the widest profit margins and the most rapidly increasing profits. Earning power is likely to continue to be valuable, especially if diversified among many nations.
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