I’m a regular Mike Piper reader and subscriber. He, much like Jonathan, is able to simply explain complex topics for average folk like me. He is also a great presenter – I’ve watched some of his presentations on the Bogle forum.
I’ve been following Mike for years and have even asked him some very involved SS questions to support members in our Retirement Club. He has always been gracious and answered the questions. Great content on his blog.
Mike Piper’s post is a simple exposition of the Efficient Market Hypothesis (EMH), the 1963 Ph.D. thesis by Eugene Fama, who won the Nobel prize for this work. It hypothesizes that the stock is always traded at the current fair value, and thus there is no easy way to beat the market. Hence, the average investor is better off buying the whole market, i.e. passive index investment. Fama was one of the consultants for Wells Fargo that invented the index fund strategy in the 1970s and successfully tested the strategy with Samsonite Pension fund. Wells Fargo gave it to John Bogle for free since it was unable to spread its use to the public due to the Glass-Steagall Act of 1933.
Alas, the active management fund managers never give in to this EMH. They ridiculed the first retail index fund by Bogle’s Vanguard Group in 1976 as the “Bogle’s Folly” when it flopped. Peter Lynch’s One Up on Wall Street was very popular in 1988 and still popular in the 2000s, advocating stock picking strategies to outperform the wisdom of the professional trader crowds.
What a great analogy. I couldn’t help thinking of the people I know who “did their own research” and ignored their doctors recommendation. I saved the blog as well.
Interesting analogy of the market price of investments to thousands of second opinions in the medical field. Average them together and you get the correct “norm”. Thanks for the link to Mike Piper. I’m signing up for his blog.
I’m a regular Mike Piper reader and subscriber. He, much like Jonathan, is able to simply explain complex topics for average folk like me. He is also a great presenter – I’ve watched some of his presentations on the Bogle forum.
I’ve been following Mike for years and have even asked him some very involved SS questions to support members in our Retirement Club. He has always been gracious and answered the questions. Great content on his blog.
Mike Piper’s post is a simple exposition of the Efficient Market Hypothesis (EMH), the 1963 Ph.D. thesis by Eugene Fama, who won the Nobel prize for this work. It hypothesizes that the stock is always traded at the current fair value, and thus there is no easy way to beat the market. Hence, the average investor is better off buying the whole market, i.e. passive index investment. Fama was one of the consultants for Wells Fargo that invented the index fund strategy in the 1970s and successfully tested the strategy with Samsonite Pension fund. Wells Fargo gave it to John Bogle for free since it was unable to spread its use to the public due to the Glass-Steagall Act of 1933.
Alas, the active management fund managers never give in to this EMH. They ridiculed the first retail index fund by Bogle’s Vanguard Group in 1976 as the “Bogle’s Folly” when it flopped. Peter Lynch’s One Up on Wall Street was very popular in 1988 and still popular in the 2000s, advocating stock picking strategies to outperform the wisdom of the professional trader crowds.
“There’s a sucker born every minute.” P.T. Barnum
What a great analogy. I couldn’t help thinking of the people I know who “did their own research” and ignored their doctors recommendation.
I saved the blog as well.
Interesting analogy of the market price of investments to thousands of second opinions in the medical field. Average them together and you get the correct “norm”. Thanks for the link to Mike Piper. I’m signing up for his blog.
Good move. I always look forward to them. Very good short books too.
I have four of them on my Kindle. My two favorites-
After the Death of Your Spouse (2022)
More Than Enough (2023)