Set forth below is the text of a comment that I recently put to another blog entry at this site:
Roger Wohlner, the owner of the The Chicago Financial Planner blog: Rob, interesting stuff, but it doesn’t address my question. Can you point to investment results in the real world supporting the valuation approach to investing you advocate? Is their somebody actually achieving superior results using this approach?
All of the returns reported on in the Bennett/Pfau paper are from the real world, Roger. Those results are the results that those following valuation-informed strategies obtained.
If you are asking whether there are people who follow valuation-informed strategies, the answer is “yes.” Please take a look at the “People Are Talking” section of the site. It runs down the left-hand side of this page. You will see quotes from over 100 people endorsing my work. A number of these people are financial planners who advocate valuation-informed strategies. A percentage of their clients are obviously following their advice. Those investors are obviously obtaining far higher returns than Buy-and-Holders while taking on dramatically less risk.
The problem is that the number is too small. Many people have told me that they of course know about the 30 years of peer-reviewed academic research showing that there is precisely zero chance that a Buy-and-Hold strategy can ever work for even a single long-term investor. But they are afraid to give voice to what they believe in a public forum in clear and firm and certain language. Millions of middle-class people believe that the Buy-and-Hold advocates are shooting straight with them. Most of us have never experienced a case of financial fraud so pervasive. I know that I have never seen anything like this before.
This includes people like Jack Bogle. It was by reading Jack’s book that I learned about the errors in the Old School safe withdrawal rate studies. So Jack obviously gets it, at least on some level of consciousness. But what do you think would happen if Jack came clean about what he knows? I think it is fair to say that he is concerned that he would be attacked in the same way that I was and in the same that John Walter Russell was and in the same way that Wade Pfau was and in the same way that the researchers who wanted to do research on Rob Arnott’s ideas were and in the same way that so many others were. Jack Bogle himself does not feel that he can come clean at this point in the proceedings. The cover-up has gone on too long.
Do you have any suggestions?
I have thoughts on how to proceed. But I am not going to say that it will all be 100 percent easy for every single person involved. Looking back, that’s how we will all see it. In the long run, the benefits of telling people the truth about stock investing are so great that I don’t believe that there will be one person who will say it was the wrong thing to do. But how do we get ourselves out of the corner into which we have painted ourselves? How do we achieve the transition from the horrible place where we find ourselves today to the wonderful place where deep in our hearts we all want to be tomorrow?
That’s a question that we address as an entire society. We need policymakers involved. And economists. And academics. And investment advisors. And journalists. And bloggers. And ordinary investors. We all have a stake in seeing that we survive the economic crisis. So we all need to be involved in the solution to the problem.
That’s my sincere take re this important matter, in any event. I see it as my role to inform as many people as possible to the realities so that we all can play the role we need to play in the most intelligent and balanced and calm way possible, given the circumstances that apply.
I hope that helps a bit.