The real anomaly issue is how can people believe in a

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Unformatted text preview: ranchises for a worthless business venture to 5 people (and pay your earnings from sales of franchises to the person who sold you the franchise) and they pay you half of the money the make selling franchises to 5 more people each, and so on, the losers are the last people to buy who run out of schmucks to sell the franchise. The real anomaly issue is, how can people believe in a story that promotes such nonsense. The answer is that each bubble that has occurred over history iis sold on some version of the “new economy” story that s explains why the present is different from the past. Professor Schulze AEM 414 AEM Lecture 10 Beyond Shiller’s Book: Does Beyond Shiller Book: What He Said About the 2000 Crash predict the 2008 Crash? S&P 500 P-E Ratio: The Long Run View AEM 414 AEM Professor Schulze Lecture 10 Beyond Shiller’s Book: Does Beyond Shiller Book: What He Said About the 2000 Crash predict the 2008 Crash? S&P 500 P-E Ratio: The Short Run View AEM 414 AEM Professor Schulze Lecture 10 Beyond Shiller’s Book: Does Beyond Shiller Book: What He Said About the 2000 Crash predict the 2008 Crash? DOW: The Short Run View AEM 414 AEM Professor Schulze Red shows DOW price index. Yellow shows earnings. Blue shows P-E Ratio. White shows what Dow price index should be at a constant P-E of 14. So, just before the current crash the DOW was rationally priced at 11,500!!! So, why the CRASH? Lecture 10 Shiller fails because the crash had nothing to do with the Shiller fails stock market itself where nothing was wrong. The panic came about because of a collapse in the financial/banking/housing sector that caused an emotion based panic. Recent DOW Price Index P-E Ratio is now below 10. below Stocks are incredibly cheap. Panic caused by the emotion of fear which is located deep in the inner brain, the amygdala. the amygdala Use your cerebral cortex and buy stock now or do not sell. Neuroeconomics studies the Neuroeconomics studies conflict between the cerebral cortex (rational calculator) and the amygdala (irrational the (irrational emotion) when facing risk. Never let your amygdala get Never get you to buy high and sell low! AEM 414 AEM Professor Schulze Lecture 10...
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