I’ve had extensive e-mail correspondence and one long telephone conversation with a community members named “Larry” about the need for us to get political leaders involved in speeding up the transition from Buy-and-Hold to Valuation-Informed Indexing. I will be setting forth the text of some of those e-mails here at the blog in days to come.
Set forth below is the text of an e-mail that Larry sent me on November 2, 2009, after a long telephone call on which we conversed about these matters in depth. Larry spent several weeks going over all the materials at my site and at John Walter Russell’s site prior to the telephone call.
Rob,
Thanks for talking with me on the phone.
I get how big this really is after talking with you yesterday. I think the P/E 10 is an incredible risk management tool that large institutional investors, actuaries, economic forecasters, individual investors, mutual fund managers, and financial planners should all use. Risk management is the one area that the people in these professions understand. The P/E 10 tool has the ability to drastically change how the entire investment industry operates and measures risk.
However, I still believe you need to include the qualitative analysis to back up the numbers in this tool to gain credibility. In my view, overcoming this “last missing link” will take the P/E 10 into the mainstream of the investing world. I could not sleep last night because I believe this tool combined with quality macro economic analysis will change the course of investing in this country.
I am working on a conceptual model of how to take this mainstream. I also think that venture capitalist or angel funding is a very real possibility to fund a business that will promote this tool to the masses. I am more than happy to contact key venture capitalists and even Mr. Perot himself if we can package this properly.
Mr. Perot does not have any money in the market (or very little) presumably because of the risk involved. He has invested in bonds for many years. Suzy Orman takes the same approach as Mr. Perot. Almost all of her personal money is in bonds due to the risk in the market. There is a reason why banks don’t loan money to invest in the stock market!
Larry
critter says
So tell us.
What is your investment strategy?
Rob says
Honesty.
We’ve all accepted for many years that it is a good thing in all other areas of life endeavor.
The idea behind Valuation-Informed Indexing is to take the things that have always worked in all other areas of life endeavor and apply them in the investing realm.
It works, Critter.
Rob
Peter says
What’s your current asset allocation?
Rob says
Why do you ask, Peter?
Rob
Peter says
I’ve been reading you for years, and we had a big stock market crash in 2008, and I want to see how you adjusted your asset allocation after that, and what it is now.
Thanks,
Peter
Rob says
Given what the historical data teaches us about how stock investing works, what do you think the right allocation would be for me, Peter?
Rob
Peter says
Seriously Rob, what is the big frickin’ deal with you supplying this information? I thought your investment strategy was “honesty?”
Thanks,
Peter
Rob says
My job is to teach you how to become a more effective investor than you are today, Peter.
Your use of abusive language suggests that you are suffering from a mental/emotional block that is holding back your progress.
Do you want to deal with the problem?
If you do, you can learn wonderful things that will put you ahead of 90 percent of today’s investors.
If you do not, there’s nothing that I can do for you. That first step — opening up to consideration of the realities of stock investing that we have learned about from the academic research of the past 30 years — is an inside job. I cannot take that step for you.
You are in pain, Peter. I feel for you. But I am not telling you the truth if I tell you that someone other than you can be the one to take the first step to bringing that pain to an end.
I wish you the best of luck with your efforts to get those nasty investor emotions under control, my new friend. It’s better on the other side. I’m sure of it!
Rob
Peter says
What “abusive” words? I’m in “pain?” What in the world are you talking about? You know nothing about me. Please do not patronize me by psycho analyzing my one and two sentence inquiries.
It’s absolutely baffling why you refuse to discuss your asset allocation on a blog whose main focus is investing.
Thanks,
Peter
Rob says
The aim is to offer effective investing advice, Peter. That means giving consideration to investor emotions.
That’s the aspect of the investing project ignored by the Buy-and-Holders. That’s why we we in an economic crisis today. This is what we are trying to turn around.
Rob
Peter says
This article we’re commenting on has nothing to do with emotion. Your response is a non sequitur, and blatantly ignored my initial question and subsequent posts. Given PE10, what is your asset allocation?
Best,
Peter
Rob says
I see emotion in every one of your responses, Peter.
Are you seeking to learn how to invest more effectively or are your seeking to rationalize a decision made at an earlier time to follow Buy-and-Hold principles?
That’s the question you need to be pondering, in my assessment.
Rob
Peter says
“I see emotion in every one of your responses, Peter.”
Well, emotion is in everything we do, as you often say.
“Are you seeking to learn how to invest more effectively or are your seeking to rationalize a decision made at an earlier time to follow Buy-and-Hold principles?”
I’m seeking to learn how to invest more effectively.
“That’s the question you need to be pondering, in my assessment.”
Thanks for the advice. Since I’ve answered it, will you answer my question?
Best,
Peter
Rob says
Are you willing to say whether you are a Buy-and-Holder or a Valuation-Informed Indexer, Peter?
Rob
Peter says
Yes. I am neither of those things. Now will you answer my question?
Best,
Peter
Rob says
I’ve never seen anyone who was not a Buy-and-Holder in pain engage in this sort of behavior, Peter.
Are you able to say whether you believe that valuations affect long-term returns?
Rob
Peter says
Absolutely they affect long term returns. Now will you answer my question?
Thanks,
Peter
Rob says
How much do you think an investor should change his stock allocation in response to changes in valuations, Peter?
Rob
Peter says
Now you’re being only a taker and not giver in this exchange, Rob. How about you answer my question now? What is your current asset allocation?
Thanks,
Peter
Rob says
Are you able to say why this matters to you, Peter?
Rob
Peter says
Yes, I am. Now will you answer my question?
Thanks,
Peter
Rob says
What was your question again, Peter?
I’m just joking around.
Rob
Peter says
What’s your asset allocation? 🙂
Best,
Peter
Peter says
So, was that last comment of yours a cute way of saying you’re not going to answer it?
Thanks,
Peter
Rob says
Those are your words, Peter.
My take is that you will discover the proper answer to your question if you read the words of the thread with a good and positive and honest and life-affirming intent.
Without that, my take is that you cannot get to first base.
This emotional stuff can be tricky, eh?
Rob
Peter says
Let me get this straight: I will discover the proper answer to the question “what is your(Rob’s) asset allocation?” if I read the thread again? That’s patently absurd.
Rob, I am asking a specifically quantitative, non-emotional question. Similar to “what is 2+2?”
It is pretty rude to grill and interrogate me because I ask you a question, let me answer all YOUR questions, and then you refuse to answer my ONE question.
Thanks,
Peter
Rob says
I understand, Peter.
Rob