The Market Can Remain Irrational Longer Than You Can Remain Solvent

John Maynard Keynes? A. Gary Shilling? Harold R. Evensky? Apocryphal?

Dear Quote Investigator: The gyrations of financial markets can be startling. You may have unassailable information indicating that a stock is overpriced or underpriced, but you can still lose money because the market price may not accurately reflect the underlying verities for years. Here is a pertinent adage:

The market can remain irrational longer than you can remain solvent.

This saying is often attributed to the famous economist John Maynard Keynes, but I have never seen a solid citation. Would you please explore this topic?

Quote Investigator: In 1986 “The Advertiser” newspaper of Montgomery, Alabama reported on a presentation given by an influential financial advisor named Gary Shilling. Keynes was not mentioned when the aphorism was employed by Shilling. Emphasis added to excerpts by QI:[ref] 1986 December 3, The Advertiser (The Montgomery Advertiser), Economist Advises Change In Investment Strategy by Coke Ellington (Advertiser Business Editor), Quote Page 4B, Column 3, Montgomery, Alabama. (Newspapers_com) [/ref]

A. Gary Shilling, twice named Wall Street’s top economist in a poll conducted by Institutional Investor magazine, told more than 100 guests in an AmSouth Bank meeting room that the investment situation has completely reversed itself . . .

He also warned that “markets can remain irrational a lot longer than you and I can remain solvent.”

The next earliest evidence for this saying appeared in a column by A. Gary Shilling in “Forbes” magazine in February 1993:[ref] 1993 February 15, Forbes, Scoreboard by A. Gary Shilling, Page 236, Volume 151, Issue 4, Forbes Inc., New York. (ProQuest) [/ref]

Above all, in 1993 remember this: Markets can remain irrational a lot longer than you and I can remain solvent.

Currently, Shilling is the leading candidate for coiner of this adage. John Maynard Keynes died 1946. He received credit for the adage by 1999. This long delay means the evidence supporting the Keynes attribution is very weak.

Here are additional selected citations in chronological order.

A different thematically related remark has been credited to Keynes for decades, and it may have influenced the attribution of the statement under examination:

There is nothing so disastrous as a rational investment policy in an irrational world.

There is a conceptual overlap between these two quotations, and they share the focal word “irrational.” The reassignment of the statement from Shillings to Keynes may have been facilitated by the existence of this earlier saying. This link leads to the previous QI article exploring this alternative comment.

In 1986 and 1993 A. Gary Shilling employed the saying as shown at the beginning of this article.

In 1995 a message in the Usenet discussion group misc.invest.futures contained a version of the saying. No specific attribution was given within the message:[ref] 1995 September 17, Usenet discussion group, Newsgroup: misc.invest.futures, From: Stewart Taylor, Subject: Re: Ewing’s ideas on Corn. link [/ref]

An old trading saying…. that, by the way is very true… “The market can stay irrational a lot longer than you can stay solvent!”…. Thinking about a trade in terms of what the world can and can’t afford can be a dangerous habit.

In 1997 an Associated Press news story quoted A. Gary Shilling using the maxim. The discussion topic was the market and changing interest rates. Shilling did not attribute the adage to anyone else when he spoke:[ref] 1997 May 1, The Record, Dow Back Up To 7,000 Investors Shrug Off Worrisome Report by Bruce Meyerson, The Associated Press, Section Business, Page B01, Bergen Evening Record Corporation, Bergen County, New Jersey. (ProQuest)[/ref]

“Then we may have a clearer idea of the interest rate picture,” said A. Gary Shilling, an award-winning forecaster and president of A. Gary Shilling & Co., based in Springfield. “Given the volatility, you’re really rolling the dice. I’m on the sidelines. The market can remain irrational much longer than I can remain solvent.”

In 1999 the New York Times printed an article that included a comment from Harold R. Evensky, a financial adviser in Florida, in which he credited the maxim to Keynes:[ref] 1999 April 4, New York Times, “Mutual Funds Report: In the Stampede to Big Stocks, Some Managers Are Left Behind” by Carole Gould, Page 3.32, New York. (ProQuest)[/ref]

He remains a firm believer in asset allocation, although he said that during the quarter, a sobering market adage from John Maynard Keynes came to mind: Markets can remain irrational longer than you can remain solvent.

In 2002 a writer in the periodical “Investors Chronicle” attached both Keynes and a time frame to the quotation. In this version the word “stay” was used instead of “remain”:[ref] 2002 July 25, Investors Chronicle, How to get it right next time, Financial Times Business Limited. (Westlaw Campus Database)[/ref]

The lessons an old one. As Keynes said in the 1930s: “Markets can stay irrational longer than you can stay solvent.”

In 2007 an article in BusinessWeek credited Keynes with the saying:[ref] 2007 May 21, BusinessWeek, The Short Sell Made Simple by Lewis Braham, Section Personal Finance, Start Page 98, Quote Page 100, Column 2, Issue 4035, Bloomberg, L.P.  (EBSCO Business Source Premier) [/ref]

The trickiest part of putting your money into a bearish bet is the timing. You can be right that a market or sector is overvalued but wrong on the timing. That’s essentially what economist John Maynard Keynes meant when he said, “The market can stay irrational longer than you can stay solvent.”

QI communicated with financial journalist Jason Zweig of “The Wall Street Journal” who was working at “Forbes” in 1993, and he believes that he heard the expression by the late 1980s. This is consistent with the 1986 citation for Shilling.[ref] Personal communication from Jason Zweig of the Wall Street Journal to Garson O’Toole. Email dated August 15, 2011.[/ref]

In conclusion, this saying appeared in print by the 1986 and was closely associated with the financial analyst A. Gary Shilling. Based on current evidence it is likely that Shilling crafted of this apothegm. The evidence linking the quote to Keynes is very weak, and may be due to confusion with another saying attributed to Keynes as mentioned above. Thanks for your question.

(Special thanks to Barry Popik for his research on this topic. Popik identified the 1993 “Forbes” citation. Thanks also to the volunteer editors at Wikiquote. Further thanks to journalist Jason Zweig who was very helpful in noting that the saying was in circulation in the 1980s. Zweig stated this fact before the citations from the 1980s were uncovered.)

Update history: Information from Jason Zweig was added to the entry on November 4, 2011. On July 18, 2019 the 1986 citation was added, the note style was changed to numeric, and parts of the article were rewritten. On June 1, 2021 the text was partially rewritten.

Addendum: A small number of libraries apparently hold a transcript from a 1983 seminar during which Shilling reportedly employed the adage. QI has not yet examined this transcript to verify this citation.[ref] Year: 1983, Title: SEMI Information Services Seminar (ISS) Transcript, Date: January 23-26, 1983, Location: Newport Beach Marriott Hotel, Newport Beach, California, Quote Page 384 (GB), Publisher: Semiconductor Equipment and Materials Institute, Mountain View, California. (Unverified match from Google Books Snippet; metadata and passage may contain errors; verification required) [/ref]

A. Gary Shilling:
The stock market has been rallying since August, and the markets usually do anticipate recoveries. They’ve anticipated twelve of the last eight, I think. Of course, you need to keep in mind that the stock market can remain irrational a lot longer than you can remain solvent.

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