Letters to the Editor

Refusing to See the Obvious Letter

Rob Bennett sent me this letter to the editor:

The "Refusing to See the Obvious" article provided me with some useful background information.

I have a question that I have wondered about from time to time. I don't recall reading anything on this question, and there is no particular reason why you would have the answer to it. But I thought I would put it forward on the chance that perhaps you know something I don't or someday may come across something (or that one of our readers might).

The question is--does the securities industry play any role in funding any of the academic investing research? I do not know how the funding is done. I presume that grants and donations are made to the universities. Is there information public as to whether securities firms ever make contributions that could in some way influence the types of questions studied or the types of methodologies employed?

I am not making accusations. I am as shocked as you are by the exceedingly strange assumptions used in a lot of academic investing research, and I am trying to gain some sense of how it came to be that things are done the way they are. An alternate explanation is that things are set up the way they are because it is harder to set things up properly, and lots of researchers take the easy way out. So, again, I am not making accusations. I just find the methods used to be a puzzle, and am wondering about different explanations.

If you have read anything that sheds light, please let me know. If not, perhaps some community member will come across something at some time. We have lots of people with lots of different skill sets and lots of different life experiences who have helped out in the past, and perhaps at some point we will tap into some expertise on this one too.

My Response

I don’t know.

I am aware of a few factors.

1) The academic community is anchored strongly in achieving tenure. It is important to fit in with the community if you wish to become a professor.
2) I have found a few articles at the NYSE web site that are written by university professors. Such articles tend to be about topics such as investor profiles, but not how to invest.
3) I have seen some articles related to highly technical corners of investment research such as how to price complex options and derivatives.
4) Private firms strongly favor proprietary research. Universities generally prefer to engage in public research.
5) These days, some universities encourage faculty members to set up private research companies, at least in science and engineering. Previously, the academic community strongly discouraged private research. I have forgotten the details. There was an incident in which a university professor engaged in private research, made tons of money and then funded lots of favorably viewed research. It changed some attitudes.
6) I have read, but I cannot verify, that investment research is new to the academic community. There had been some on the fringes, but very little as the center of focus.
7) I believe that ridiculous advertising claims have created a strong overreaction. This repulsion is not limited to the academic community. But academics fail when they limit themselves to refuting the indefensible. They need balance. They need to search for and report the whole truth.

The Single Best Investment

Mike sent me this note:

"Readers of your review of Lowell's book might benefit from knowing that they can read the first 3 chapters of his book at his web site."

Here is the link. It provides excerpts, not the entire text. I had forgotten how good this book really is. It is one of the best.

You can read my original review in the Books section.

Excerpts from The Single Best Investment

SWR calculator...latest version at Yahoo

I received this letter from David just after Christmas.

Hi...I've been reading (sporadically) your earlier posts at other discussion boards and have also tracked some of the fine articles at your present site.

My issue is that I now need to get serious about some planning--and would like to use that latest spreadsheet you had saved at your Yahoo site. Well, I downloaded it..[but I] am having a devil of a time figuring exactly what numbers or estimates to put where..and then [figuring out] how to read the results.
..
Is there a tutorial on how to use it and then how to read the results?
..
Thanks...and apologies in advance if this has been covered exhaustively elsewhere..

My Response to David's Letter

Thank you. I have now written a description of the Deluxe Calculator V1.1A08a. It is brief. I hope that it helps.

I had not written a description earler.

Calculator Description

Earlier Letters

Do All Really Bad Price Drops Happen at Times of High Valuation?
I Bonds versus TIPS
How Long Do You Have to Wait for 7%?
Rob Bennett's October 6, 2005 Request
Glossary for Beginners
From a Novice in Investing

Have fun.

John Walter Russell
Updated: December 30, 2005