Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
“There’s only one thing that I believe that you don’t, Sammy — I believe that valuations affect long-term returns.”
Based on the comments over at Valuewalk, I would say it is more than one thing you don’t agree on.
The only point of substance re which we disagree relates to valuations — I believe that valuations affect long-term returns (as shown by Shiller’s research) and you believe that the market is efficient (as some believe was shown by Fama’s research). There is nothing else.
I suppose you are referring to differences we have re the use of death threats and demands for unjustified board bannings and tens of thousands of acts of defamation and threats to get academic researchers fired from their jobs — the financial fraud stuff. All of that stuff is process-oriented. You wouldn’t believe in any of that stuff either if you did not feel that your back is against the wall. You rationalize financial fraud tactics because you believe that the market is efficient and this belief is so core to your existence that you cannot bear to give it up. So, when I challenge this belief, you resort to stuff that in other circumstances you would condemn. All of our process-oriented differences relate back to the one substance-oriented difference that is the driver of the entire debate.
The only way out is to resolve our differences on the substantive issue. To do that, we need to talk things over. That’s how people learn. Learning cannot take place without exchanges of information. So it is only by having open discussions that we can resolve the substantive matter.
It can’t be just me representing the Valuation-Informed Indexing “side” of the debate. You need to hear lots of different perspectives on lots of different questions. That’s an essential part of the learning process too. We are going to need to have honest and open discussions at every site on the internet. We are going to have to stop discouraging open debate on these matters and start encouraging it. We all need to hear people from all sides expressing their sincere views on every possible question.
That’s the only way out. I believe that these discussions will lead to a very good place. The first step is the hardest step. The first step is acknowledging that discussions are needed. Implicit in the first step is an acknowledgment of at least the POSSIBILITY that a mistake was made. Once that step is taken, the learning process begins and all the other steps come easier.
That’s it. I believe that a mistake was made in good faith and that it was very hard for the people who made the mistake to acknowledge it because the stakes here are so high. And so people engaged in a cover-up and even included themselves in the group that must be blocked from learning the realities. Now we have a big mess on our hands. And a huge opportunity to advance human understanding of a critically important matter as well.
Every day of delay hurts us all. We all want the same things. We all should be working together.
It is not possible that Fama and Shiller are both right. The came to opposite conclusions about how stock investing works. Both were awarded Nobel prizes. But one of the two got things terribly, terribly wrong. We need as a society to figure out which one of the two it was who got things right and which one of the two it was who got things wrong. We all need to pull together and get down to the job of resolving the differences between these two Nobel prize winners. We need to begin doing that by the close of business today.
This is my sincere take re these terribly important matters, in any event.
I naturally wish you tall he best that this life has to offer a person, old friend.