Yes, Stocks Can Become Overvalued
But recognizing when is very difficult.
The Socratic Method
Friday's column advocated self-awareness. The stock market's movements seem to be meaningful, but their signals are spurious. Therefore, investment wisdom consists of learning to avoid the temptation to trade. The investor who acknowledges his ignorance is better off than the investor who does not.
That argument, of course, was not invented here. From Plato's "The Apology": I am wiser than this human being. For probably neither of us knows anything noble and good, but he supposes he knows something when he does not know, while I, just as I do not know, do not even suppose that I do. I am likely to be a little bit wiser than he in this very thing: That whatever I do not know, I do not even suppose I know.