"Naturally the disservice done students and gullible investment professionals who have swallowed EMT has been an extraordinary service to us and other followers of Graham. In any sort of a contest - financial, mental, or physical - it's an enormous advantage to have opponents who have been taught it's useless even to try." - Warren Buffet

This quote neatly summarizes what I fundamentally don't accept about this viewpoint. Specifically, most of the article's arguments are those you encounter from Efficient Market Theory which has pervaded our financial education to the point of being accepted as blindly as faith and has lead to a lot of pain & suffering by investors. Here are some key messages from the article which I find incredibly dangerous and damaging:

1) UNLESS YOU ARE "SPECIAL", INVEST IN INDEX FUNDS

Index investing has become a sexy mantra in the era of EMH and passive investing. If you can't beat the market - why not just follow it? At first glance it does seem like a great option as it cuts out middlemen fund managers who seem to invest on chance. However, it's a mantra that is self defeating as more investors adopt it. Although indexing is predicated on efficient markets, the higher the percentage of all investors who index, the more inefficient the markets become as fewer and fewer investors would be performing research and fundamental analysis of equities. At the very extreme, if everyone practiced index investing, stock prices would actually never change relative to each other since everyone would be "all in" [I've loosely paraphrased Seth Klarman's arguments from Margin of Safety but for a much more exhaustive treatise please dive into the novel]

I think a golden rule of investing is you should reject any absolute assessment of a investment vehicles ("gold always goes up", "invest in index funds", "junk bond funds have lower risk at higher return"). Wall Street loves to peddle their latest, shiny investment creations; don't rely on their faith - no matter what you invest in, you better do some damn research on it (even an index fund).

2) STOCK PRICES REFLECT THE CONSENSUS AND GOING AGAINST THE CONSENSUS IS BAD (worded as aggressive in the article)

This is in it's heart is the essence of the efficient market hypothesis - prices are rational and reflect underlying public information. I'm not going to into a huge essay against pricing being rational but history has shown time and again that prices reach irrational exuberance; tulip mania and trading sardines are not merely historical phenomenon. Intelligent Investor by Ben Graham details out some clear cases where stock prices did not reflect anything remotely close to underlying public information. Off the top of my head, there are many examples where passively managed closed end mutual funds traded significantly from their NAV value (which makes little sense). Historical records shows that supply and demand factors (rather than underlying information and rational actors) drive stock market prices.

As a nice hypothetical example, let's think of a change in the S&P 500 where the new stock AWSM pushed out OLDFTHFUL from the S&P 500. Let's assume the changing of the index happened during a lull period in both companies where no material information about the companies was given out (i.e. their economic forecasts were stable during the S&P shuffling). Since everyone was following the "invest in index funds" argument of the author, this triggers billions of purchase orders for AWSM and lots of sell orders for OLDFTHFUL. Naturally one stock rises while the other stock falls even though there has been absolutely no change in the forecast for either company.

3) YOU ARE COMPLETELY BEHIND THE CURVE WHEN INVESTING - DON'T BOTHER UNLESS YOU KNOW INSIDE INFORMATION

Nothing could be the further from the truth. Frankly, it's probably one of the best times to do rigorous stock analysis since 1) we are in a time when most investors embrace the EMT and thus don't bother doing even basic fundamental analysis 2) financial info and SEC filings can be easily acquired through the internet & hacking and financial modeling can be easily done with Excel & programming 3) many of the institutional actors that drive the market are not incentivized to conduct fundamental analysis. Specifically, mutual funds have specific characteristics that prevent them from acting rationally (requirements on diversification, inability to short equities, large fund size, low cash reserves, etc.). Hedge funds have similar issues (20% fee structures which incentivize short term thinking).

Things might not be as rosy as during Ben Graham's time, but don't fool yourself into thinking that doing research into your investments is a waste of time. Any natural scientist will never accept that further research will yield nothing, but for some reason we accept this in the investing world.

4) YOU ARE TRADING AGAINST GOLDMAN SACHS. DO YOU REALLY WANT TO BET AGAINST GOLDMAN?

I hate this perception; Wall Street's business model is largely driven by volume rather than investment acumen. I.e. they make money as long as the market moves, regardless of the direction. Goldman is a giant because they manage the machinery of markets, not because they are expert stock pickers.

Overall, I think the world would do a lot better with this advice: "A stock is a small percentage share of a company. Treat investing your money in an equity exactly as you would treat investing in a business." I think most of the investing mistakes alluded to this article would be prevented by heeding this advice.