I reported in an earlier blog entry that I have asked the author of the Pop Economics blog if he would like to post a Guest Blog Entry responding to his (well-argued and fair) blog entry making the case for Buy-and-Hold over Valuation-Informed Indexing. Pop said “yes” and I sent a few words his way. Set forth below is his response to receipt of the Guest Blog Entry (I will post my reply as Monday’s blog entry):
Thanks for e-mailing. I was remiss in not responding sooner.
There are some things I like about the post as it stands now, and some things I’m not quite sold on. In general, I feel like it needs to read more as a stand-alone defense/espousal of value investing, as if the post you’re responding to had never been written. Right now, it reads more like a lengthy response to something on a forum, which I think will turn off anyone who hasn’t read that original post. I wouldn’t structure it as a big counterpoint. But on to the substance of it…
I like your first point a lot (that you’re making a value judgment regardless of if you try to measure value or not). You lost me on the next two points. It sounds like you’re saying the problem of extremely over or under valued markets would be solved if mainstream advice was to be a value investor. But that’s not an argument that someone should become a value investor now.
I think we have to assume that for the foreseeable future, most people aren’t going to be value investors. So we need to give people a reason to be a contrarian while the rest of the world is catching up. Likewise for point three…most experts advocate buy-and-hold right now. Since most investors don’t follow that advice (and sell or buy based on emotion), it doesn’t seem logical that changing the experts’ message would lead to an efficient market.
Anyway, like I said, I think the post would be helped a lot simply by forgetting that I ever wrote the first post…reference it once near the top but forget it later on. I’m really happy to read a revision if you give it another shot.
As a side note, I really appreciate the comments and contributions you’ve made to the blog so far. I know other blog writers have made this point to you before—not everything needs to be turned into a buy-and-hold vs. value debate—but I’m happy to have it in the proper forum. One thing I do want to avoid–and I’m sure you appreciate this–is to bring any of the meanspiritedness that has occurred on some of the forums/blogs you’ve visited before to Pop Economics. If that happens, I’ll shut the debate down immediately, no matter how great the discussion is. I just don’t think people want to read that.
Anyway, thanks again and let me know.