I’ve posted Entry #66 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Why Is the Valuations Topic So Darn Controversial?
Juicy Excerpt: If you read the comment that I put to the blog post, you will see that I believe that our discovery in 1981 that valuations affect long-term returns is akin to mankind’s discovery of how to harness electricity to enrich our lives in hundreds of different ways.
Imagine that the discovery of how to make use of electricity was as controversial in its time as the discovery that valuations affect long-term returns is in ours and that the controversy caused thousands of talented inventors not to pursue their visions. We wouldn’t today have television or computers or radios or waterpiks if there had not been people who came before us who taught us how to harness the power of electricity.
Great advances in human knowledge are always controversial. Small advances are not because small advances don’t matter much one way or the other. Great advances shake things up. Great advances inspire both attacks and defenses. Great advances are where the action is.
Pfau needs to ask himself — Why are people so upset to learn how stock investing really works?
It’s because investing is important.