Recent blog entries have set forth the texts of e-mail correspondence between a community member named “Larry” and me. Set forth below is one that Larry sent on November 4, 2009, and one that I sent in response that same day.
I’m now a 100% believer. I am sure that you have this chart from Ed Easterling but it is awesome and supports your position on valuation investing.
I came across this on another site. I think I may be matching your passion on this subject!
That’s good news.
Yes, Ed Easterling puts out fine stuff. He came out very hard on the errors in the Old School SWR studies in an article at his site, saying that many people will be spending their declining years working as greeters in WalMart because of the demonstrably false retirement-planning claims.
Several years back, John Russell and I invited Ed to a special event at the SWR Research Group board at which he fielded questions from us in real time for about an hour or so. He had agreed to field questions from the entire community at the NoFeeBoards.com site, but the Goon element there insisted that the discussion be banned (John and I ignored the ban and were later removed from the site because we continued to post honestly).
I link to Ed’ s site in an article that I am announcing at my blog tomorrow. The article links to 20 studies showing that valuations affect long-term returns. I have not cleaned it up yet (there may some typos and I have not double-checked that all the links are in working order). But you might want to take a look at some of the research that is rarely played up by The Stock-Selling Industry:
What I believe you will find in coming days is that more and more implications of the reality that valuations affect long-term returns will hit you. The implications reach in a hundred directions. This is so big that our brains are not capable of taking it in all at once. I’ve been thinking about this stuff 24/7 for over seven years now and I still learn something new almost every day. I have recorded 184 podcasts of over an hour each exploring the implications and I have a list of over 100 more than I will record in coming days if time becomes available.
An important issue that comes up over and over again in this debate relates to how it is that human learn about a subject of interest. We are NOT logic machines. We do not learn solely by processing evidence. We have filters that “protect” us from information bits that “do not compute” according to our accepted paradigm. Learning is a gradual process. We take one idea in and acceptance of that one leads to another and acceptance of that one leads to yet another. It takes a lot of these small changes to bring about a paradigm shift in our thinking.
This is why I feel so strongly that we need to have a place on the internet where people interested in investing can congregate and post honestly. People are not going to come around to these ideas unless they are permitted to ask questions and bit by bit come to a new understanding. We have found thousands of people who are interested in doing so. The rub has been that there is a much smaller number that is determined to block the learning process and this group is about 50 times as intense as the group that favors the idea of allowing the learning process to mover forward.
Once we get to a point where honest posting is permitted, I believe that Passive Investing is finished. There is not one person alive who benefits from it (this includes The Stock-Selling Industry, in my assessment). It will all fall down once it can be questioned effectively. So my belief is that the key is figuring out a way that questions may be raised as part of reasoned and civil discussions.