Wednesday’s blog entry reported on an e-mail that academic researcher Wade Blog sent to me on January 20, 2011. The text of my response is set forth below:

Wade:

I just saw the entry at your blog. It’s stunning. It’s so good and raises so much promise that it scares me to let in the words put forward there. It’s going to take some time for the full impact to hit.

I hope that this is the thing that opens the door (my heart has been crushed re this matter many times in the past). If it is, or if it loosens the door enough so that someone else is able to swing it open with one more further little push, we are going to see some amazing things in days to come.

You obviously get it re valuations. But my experience with this is that, the deeper you go with it, the more you learn; the potential here is truly beyond belief — we are on the threshold of the development of a new and improved free market economic system (if people are able to learn about the effects of valuations, significant levels of overvaluation become a logical impossibility, which means that the economic crises that follow from times of extreme overvaluation are avoided).

I’ve had the strange experience for nine years now of seeing both the most wonderful things I have ever seen and the most awful things I have ever seen combined in the same grand debate. I sure would like to see forces set in motion that let the good stuff become dominant and the bad stuff to be pushed into a far-off corner.

My deep thanks for the breakthrough and inspiring work you have put forward. You’ve helped many, many people.

Rob

Wade responded later the same day. He thanked me for my comments and said: “Of course you deserve much of the credit as the whole idea of Valuation-Informed Indexing belongs to you.” He added that Stein and DeMuth have examined similar ideas but noted that ” they were too caught up in that 100% stocks /100% bills idea for it to be useful for long-term conservative investors.  You are the one who laid out strategies like 30-60-90 that will be the basis for all my simulations.”

Wade asked: “Do you mind if I call the paper “Valuation-Informed Indexing”?  I thought that would be the best name for it, and of course I would credit you as the originator of the term.” His e-mail stated: I have been toying with the idea of sending the paper to the Journal of Finance, which is the most prestigious journal in academic finance. There is a high chance that they will reject the paper for publication, but I think it is worth a shot.  At any rate, I am hopeful that the eventual paper can be published in a good academic or practitioner journal, and that will help bring more recognition for these ideas.  If it is in a good journal, Robert Shiller might even read it.”