Rip Van Winkle investing

"If you're so smart, why aren't you rich?" This is the epithet that is especially irksome to economists, who are supposed to have some understanding of the economic tides.

Today's NY Times reports ("Be Warned: Mr. Bubble's Worried Again") that Yale's Robert Shiller went public with his "irrational exuberance" call in 1996 -- and the stock market collapsed less than four years later. He made the famous call when the NASDAQ Composite was near the 1,000 mark. We now know that it rose to over 5,200 in early 2000 and then fell precipitously. It is now back near 2135. Rip Van Winkle's $1 million dollars left in a NASDAQ Compsite index fund when Schiller made the call would have more than doubled in less than nine years and Rip, wiping the sleep from his eyes, would not be all that disappointed.

Van Winkle's peers, on the other hand, might have listened to Shiller and moved into ten-year Treasuries which were earning approximately 6.5%at the time -- and would be about one-half million dollars poorer than Rip today. Many others would have bailed when the NASDAQ hit bottom two years ago and would really be in bad shape.

Economic forecasting is no walk in the park. Even for economists.