My reasoning is simple: when using rebalancing as a part of one’s strategy, it is key that the different allocation groups are not typically in sync with one another. Canada’s market is generally in sync with the US and Europe, so all that these portfolios offer in my opinion is risk in terms of currency volatility. The US and Europe don’t offer significanlty better returns over the long term either

EAFE of course also includes Japan and Australia who are not typically in sync with us, but that’s about it. Japan has issues in itself. Australia though I think is the best foreign developed market for Canadians, I believe, as the AUD and CAD generally move in step with one another while the market performance varies. Of course, that’s because our two economies are very similar so Aus may offer little more than being an expanded Canadian market. Plus, there are no Aus specific ETFs available in Canada I believe.

The causation works the other way around, Carlyle. It was learning how much damage Passive Investing has done to million of middle-class investors (and ultimately to our economic system and in recent months even to our political system) that caused me to embark on a “crusade” to rein in the power of The Stock-Selling Industry to continue to promote the Passive model 28 years after the academic research showing that valuations affect long-term returns was published.

Have you ever checked the numbers to see just how much financial ruin has been caused by promotion of this reckless “strategy”?

In January 2000, the U.S. stock market was overvalued to the tune of $12 trillion. What do you think it does to an economy to have $12 trillion of funny money floating through it?You point to things like housing bubbles and credit rating agency “shenanigans” to explain our economic crisis. Do you ever wonder whether the $12 trillion in funny money caused by the promotion of Passive Investing had any influence in causing the housing bubble or the credit rating agency shenanigans?

If you check the historical record, you will see that we have tried Passive Investing four times in U.S. history and that we have experienced an economic crisis as a result each and every time. I am beginning to detect a pattern.

Generate trillions in funny money and you are going to destroy the strongest economy on the face of Planet Earth. It happens every time. During the times when the “experts” are willing to talk straight with people about how stock investing works in the real world, all of the sorts of problems that you point to never seem to turn up. I wonder why.

Rob

Up until Mr. Bennett shared this wisdom with us I was under the illusion that the housing bubble, commodities bubble, liquidity issues, predatory lending, overleveraging, subprime mortgages, CDO’s, CDS’, credit rating agencies shenanigans–along with a host of other factors–contributed to the financial crisis. It’s good to have all the root causes distilled down to one simple factor that just coincidentally happens to support Mr. Bennett’s crusade against buy-hold-rebalance (passive investing) strategies.