“The Science Behind Valuation-Informed Indexing When Properly Applied Has Always Worked Just As the Science Behind Polling When Properly Applied Has Always Worked. It’s the Humans Who Get Emotional and Who Apply Science in Inappropriate Ways. That’s on the Humans, Not on the Science. Science Works When Applied Properly.”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Nate Silver said Hillary was going to win. He was wrong. You said there would have been a crash by now. You were wrong. It shows lack of credibility.

He didn’t say that Hillary was going to win. He said that the science that he was using told us that Hillary had a 70 percent chance of winning and that Trump had a 30 percent chance of winning. The result we have seen is perfectly consistent with the science that he used to inform his statements.

I did not say that there would be a crash by now. I said that the science that I was using told us that the long-term value proposition of stocks was poor and that, while no one can predict when a crash will come, my personal belief was it would come by now. The result we have seen is perfectly consistent with the science that I used to inform my statements.

The science behind Valuation-Informed Indexing when properly applied has always worked just as the science behind polling when properly applied has always worked. It’s the humans who get emotional and who apply science in inappropriate ways. That’s on the humans, not on the science. Science works when applied properly.

Silver distinguishes between “forecasts” and “predictions.” He says that it was his “prediction” (but not his forecast) that Clinton would win; his forecast was that Clinton had a 70 percent chance of winning and that Trump had a 30 percent chance of winning. If you go by that terminology, it was my “prediction” (but not my forecast) that we would see a crash by now; my forecast was the numbers generated by The Stock-Return Predictor (which show that stocks are a bad investment choice when selling at the prices that apply today).

Polls don’t tell a campaign everything that the campaign needs to know. I have no problem with a political professional saying “I am not going to make decisions solely by looking at polls because they do not give all the information I need.” But I have a big problem with someone saying “I am not going to use polls in the campaign that I am running.” To not take advantage of the insights offered by science is foolish and irresponsible, in my assessment.

It’s the same with the peer-reviewed research in the investing field. I have no problem with someone saying “P/E10 does not tell me all there is to know about stock investing and so I am going to look at other things as well.” That’s rational. But I do not view it as rational for someone to say “I am going to ignore the last 35 years of peer-reviewed research entirely because it does not answer every last question.” The last 35 years of peer-reviewed research answers many important questions and all those who put themselves forward as experts in this field should at the very least be making themselves familiar with what the research says and trying to educate themselves as to the possible implications of the findings of that research.

The bottom line here is that science is a plus. Science will never answer every last question and it is absurd (and goonish!) to demand that it do so. Science is a plus and science should be put to good use. All people who offer investing advice (whether experts or not) should be putting the people who hear their words on notice as to the limitations of the science they employ. But no one should be rejecting the last 35 years of peer-reviewed research solely because it fails to answer every last question.

There are many important things that the peer-reviewed research can tell us and there are some things that we would like to know that the peer-reviewed research cannot tell us and anyone who rejects the peer-reviewed research out of hand because it does not answer every possible question is being unreasonable and demonstrating that he or she is dominated by his or her Get Rich Quick urge. To make good use of the science available to us is the RATIONAL thing to do. I am happy to live in a day when the science of investing has progressed in a major way beyond what it was in the pre-1981 Buy-and-Hold Era. I aim (it is always a struggle for every one of us) to be a RATIONAL human.

My sincere take.

Rob