October 23, 2008 Robert Shiller keynotes annual Securities Forum Play video

(Brian Burnell, NECN) - The keynote speaker at the annual securities forum in Stamford sponsored by the Connecticut banking department was Yale University professor Robert Shiller. His new book released just over a month ago is entitled subprime solution: how the global financial crisis happened and what to do about it. A roomful of financial professionals listened to him say we got into this through a combination of poor financial advice and irrational exuberance by everyday people.

Prof. Robert Shiller, Yale University Economist: Now we can't fix human psychology but we can work on improving the way our institutions deal with this vulnerable human psychology and its what we have to do. This whole mess that we're in is due to a colossal failure of risk management.

He blames that in part on people getting investing advice from salesmen rather than unbiased advisors. He also points to the prevailing attitude that home prices would always go up fueling subprime lending.

Brian Burnell, NECN: Professor Shiller says fundamental changes must be made to the financial system to see that this never happens again but, at the same time, we can't forget the little guy.

He believes preventing home foreclosures is key to solving the problem. He also thinks people need better advice to help separate emotion from facts as they invest. Hard to do in an information age where everyone has a computer.

Prof. Robert Shiller, Yale University Economist: I

As for his own investing he says right now he is looking for opportunities to get back into the stock market. Why?

Prof. Robert Shiller, Yale University Economist: Well, the price to earning ratio is no longer high as I defined it. I have my own definition and its falling and I believe when the market gets cheap you should go in a bigger way.