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No. of Recommendations: 5

Since you got such a resounding approval for the article by Fool krook1 I decided to take anther look at it. I confess that I ignored it when you first posted it.

The article says that John Hempton opined "that the primary driver was the fact that the pace of technological change had accelerated, such that we have seen an unprecedented level of disruption to traditional business models."

Further down he proceeds to discredit this opinion saying "Cliff Asness of AQR has undertaken a comprehensive systematic quantitative analysis of this argument to determine whether this intuition is correct, and found absolutely no evidence to support its veracity." The lack of evidence is not proof to the contrary. In a court of law lack of evidence is enough to find a verdict of not guilty which is not the same as proof of innocence. All it proves is that there are no grounds to declare guilt beyond a shadow of a doubt. All swans were white until they found black swans. In fact, never have all swans been white, we just didn't have the evidence.

I don't really fault the above but the author's confirmation follow up is bogus: "In fact, value portions of the market have actually done slightly better on these metrics vs. long term averages over the past decade." Accepting that this is a perfectly valid statement all it says is that value also accelerated vs. long term averages. But if value underperformed growth then growth must have accelerated faster than value which accords with the premise the author is trying to disprove, that "the pace of technological change had accelerated, such that we have seen an unprecedented level of disruption to traditional business models."

What the author says about intuition is correct, Aristotle was wrong about the intuitive laws of motion, but that does not prove or disprove the acceleration of technology.

The author states "Hempton's argument is that the pace of change/disruption has accelerated, but Asness' quantitative analysis does not support that assertion - at least from the perspective of it having a tangible impact on value stocks' aggregate fundamental performance." Just because "Asness' quantitative analysis does not support that assertion" is not proof that Hempton is wrong.

I take a simplified or pragmatic view. The S&P 500 is considered a fair representation of the stock market while NASDAQ is generally addressed as "tech heavy." I equate the S&P 500 index to value and NASDAQ to growth and this is what I see:


If you buy at a top it will take a long time to get even, longer on NASDQ than on the S&P 500, but with dollar cost averaging growth beats value.

Denny Schlesinger
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