Recent blog entries have reported on my correspondence with a community member named “Larry.” Set forth below is the text of an e-mail that Larry sent me on November 4, 2009, and one that he sent me on November 11, 2009.
Thanks for the information. I will do whatever I can to help from this point forward. I may even start a site myself and link to your site. My mind is spinning with positive ways to get the word out.
I just wanted to check in with you.
I presented the valuation index approach to some friends and influential acquaintances this week and they all think it makes sense. One of the individuals follows Ed Easterling’s writings. I’m also finding that those in the Hedge Fund world have an understanding of valuations and index investing. I’m not sure if that is good or bad thing since I’m not a big fan of Hedge funds.
However, I think the valuation approach makes a lot of sense to the middle class investor. I’ve been testing the calculator with people in my network. The response is way positive. The key at least for me is explaining that the P/E 10 and valuation informed investing is a tool for asset allocation not market timing. I have a friend that significantly reduced their exposure to stocks based on the return calculator as an asset allocation tool.
I also came up with a different way of presenting valuation investing. I call it “The Index Fund Movement Strategy”, and people seem to get it. When the P/E ratio is high, Stocks generally begin to die. Therefore you reduce your allocation of stock index funds e.g., the S&P 500. When the P/E ratio is low, Stocks generally begin to grow. Therefore, you increase the index fund stock allocation portion of your portfolio. I am also working on a simple chart that shows this concept graphically and it’s pretty cool.
Have a great week and keep the faith.