KILLER SHILLER

John Jonelis


Robert Shiller TAt Loop Lonagan’s urging, I’m walking his 85 pound bull terrier Clamps down the hard Chicago winter pavement. I don’t mind because it’s an opportunity to road test my two knee replacements.  That’s right; I’m the happy product of the wonders of modern orthopedic carpentry!  And I enjoy the best physical therapy known to man because I own the company!

Old Donatas Ludditis flanks my other side to make sure I don’t slip on a stray patch of ice. Despite my upbeat attitude, I hold Clamp’s heavy leather leash with some trepidation.  In my condition, I seriously doubt my ability to control such a large and volatile animal.

DSC04929e500

Clamps

I ask Loop why he insisted on this excursion.

“Hadda break you outa that place. Dem physical therapy gals is controllin’ yer whole life.  And we got business t’ discuss.  Ain’t that right, Don? ”

Old Man Ludditis slowly nods. “You listen to what he say. In old country we obey elders, not women.”

I can’t imagine anybody more elderly than Don but I object: “Everybody says my recovery is going so well.”

Don lays a hand gently across my shoulder, as if taking me into his confidence. “John, I know you invest big in this physical therapy company…but it not right.”

“Phooey! All the employees of Pavlovian PT are extremely lovely young ladies—” I catch my blunder and quickly shift gears. “I mean highly skilled physical therapists.”

Don sadly shakes his head. “John, it not look good. It seem—how you say—immoral.”

“It does plenty for my morale.”

Lonagan sighs. “Dem females got you completely bamboozled.   Yer prob’ly takin’ enough Norco so’s you don’t notice.  Brain’s like mush.  So lemme lay it out fer ya, okay? 

  • “That nutritionist feeds you fulla nothin’ but vegetables ‘n’ health food supplements. Doncha even notice what yer eatin’? Today, we’s gonna get ourselves some thick juicy steaks. How’s about that?
  • “Then there’s that Asian beauty twists ya into a pretzel twice a day ‘n’ yer too numb ‘n’ googoo eyed t’ feel any pain. C’mon, admit it—yer putty in her hands. So it ain’t yer brains behind this deal. What does that leave us with?
  • “Then that knockout Swedish masseuse gives you a hot bath ‘n’ rub down. Hoo boy, I ain’t sure I can take any more ‘o dis.

“I deeply resent these lewd insinuations.  Nothing improper is going on.”

“Resent away, John. Sheesh—I betcha never give business er economics a thought.  Prob’ly fer weeks.  Get my drift?”

He’s got me there. Economics definitely hasn’t crossed my mind at all.

Clamps lunges at a bright green Lexus sedan.  Probably targeting a tire. I haul back on the leash and quickly lose my balance.  Lonagan grabs the lead and lifts me by the collar before I tip over.  A broad smile spreads over his mug.

“But now we’s free, John boy! Take a deep breath! We can talk ‘bout anything youse guys want.  And get some real food!”

“Yah,” says Don.  “Good talk. Good food.  This is place.”

We’re at Michael Jordan’s Steak House.

“Just hook Clamp’s lead over that post.” Lonagan points toward the curb where cars whoosh past on Michigan Avenue.

“Loop, this is a rare and valuable animal. Somebody will steal him.”

“Can’t take ‘im inside. It’ll be okay.” 

We leave the dog at the curb, get ushered to comfortable red leather seats, and immediately order our steaks.

Loop leans back, takes a healthy sip of beer, and exhales in satisfaction—a clear signal he’s opening up a topic of conversation. “I saw Robert Shiller talk the other day. Big deal economist.  Know the guy?”

Robert Shiller

Robert Shiller – from Wikipedia

It takes me a moment. “Uh…financial guru? Yale, I think.  Nobel prize in econ?”

Don: “He share prize with Eugene Fama and Lars Peter Hansen. They—both of them—University Chicago boys.”

Loop slams his empty glass to the table. “Them guys never agree on nothin’. Fama gave us that crazy Perfect Market Hypothosis.”  He spins his index finger around his temple—an unmistakable and insulting gesture.

I lean back to enjoy the fireworks.

Ludditis raises his voice a notch. “Perfect Market Theory—it settled science

Loop: “Well, I guess a guy’s gotta believe in somethin’. I hate t’ contradict a good Chicago boy but that theory is a load o’ bunk.”

Don: “Big finance thinkers—they all say is true.”

Loop: “Only in universities ‘n’ now Shiller proved otherwise. Da big brokers ‘n’ traders always knew better.  It’s so stupid, it’s—” 

Loop stops. Cocks his head.  Switches to a conciliatory tone. “Okay Don—why doncha explain it to us in simple terms, so’s we understand?”

Don raises himself erect in his chair. “I try. With you, is not so easy.  I give example:  Once upon time, news come out on certain stock.  Investors, they predict it go up.  Everybody buy.  Drive up price.  Stock no longer good value.  Fall again.  Price chart show no logic or reason—what they call Random Walk.”

“Bullshit!” Loop’s thick fist pounds our heavy table and beer sloshes out of my glass.  “Sure they drive up da price.  It’s a determined strategy.  Once that happens, the trade is done, ‘n’ all da smart money is already out with fat gains leavin’ da retail crowd high ‘n’ dry.  Markets move due t’ aggression.  It ain’t some disconnected perfect market.   Real traders profit in real dollars. 

“But now that’s changing too. Da High Freaks—I mean da big brokerage houses—is tradin’ with powerful computer algorithms, in ‘n’ out in miliseconds.  Hell, they make over 70% of the volume ever’where ya look.  They pushed all da floor traders off the edge of the world.  Kaput!  Short term gets killed off by shorter term ‘n’ da universities still say it don’t exist!”

Me: “That’s why you switched to private equity?”

“Yeah, I saw it comin’ years ago.” Loop shows both palms.  “But I still wanna talk about Bob Shiller.

S&P Price Earnings, Div, Int from Irrational Exuberance Shiller

S&P Index Price vs Dividends – from Irrational Exuberance

“Ever’body thinks investors make rational decisions.  Shiller’s a completely different animal.  He takes into account all da crazy stuff goes on. He gave us Behavioral Finance.  He called da internet bubble o’ 2000 right to the month. Then he gave us da Case-Shiller Index ‘n’ called the housing bubble.” 

Loop turns his palms back down.  “Fama never predicted nothin.’   

Loop pauses—for effect I suppose—then goes on: “Shiller says, you can predict asset prices. Fer an economist, dis is big stuff!  How does he do it?  Way too much volatility caused by illogical decisions compared to future cash flow.  Turns out you can measure it.  That shakes up da whole academic world.” 

Home Prices, Irrational Exuberance Shiller

Home prices – from Irrational Exuberance

So this is this the news flash I missed while embroiled in such excellent and enjoyable physical therapy.

Don: “You not correct about Shiller study.  It predict long term only.  To quote famous economist, ‘In long run, we all dead.’”

Loop: “Yeah, Shiller’s model’s limited t’ dividend-paying stocks, so that’s as far as he can go fer now. Maybe someday he gets the resta the story.” 

Our steak is served and we all tuck in. When dinner is done, Lonagan surprises me by paying the bill.

We exit the premises to find Clamps crouched on the pavement, his short, powerful tail wagging vigorously. The dog is happily chewing on an electric green Nike sneaker.  I always thought dogs were color blind.

Loop bends down to inspect the shoe. “Just makin’ sure there ain’t no foot in it.”

READ – THROW THE BUM OUT

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Sources:

Wikipedia bio on Robert Shiller.

IRRATIONAL EXHUBERANCE – Robert Shiller

The Royal Swedish Academy of Sciences – Prize in Economice 2013

 

Image Credits –Irrational Exuberance—Shiller,  Bio on Wikipedia

Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link. This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.

.Copyright © 2016 John Jonelis – All Rights Reserved

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Filed under angel, angel capital, angel investor, Big Corporations, big money, Characters, chicago, Chicago Ventures, Conflict, Donatas Ludditis, Entrepreneur, Entrepreneurship, Entrepreneurship and Politics, Financial Markets, loop lonagan, Nobel Prize, vc, venture capital

One response to “KILLER SHILLER

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