Doesn't this make every strategy equally invalid? Without a crystal ball or extraordinary insight, long term backtesting is kind of all we have!
We do have extraordinary insight. From people like Benjamin Graham. He wasn't back testing and coming up with theories on how to invest, he was using logic and reason. From people like Jack Bogle. He wasn't back testing to create index funds.
My point isn't that back testing is useless. It's certainly something one ought to look at carefully. But back testing isn't the only thing we have, and shouldn't be the primary reason why we accept a strategy.
If I back tested versus the market and found that the market popped up significantly every 27th Tuesday unless the month it was in started with a J, then skip that month, would you invest with that? Even if it backtested perfectly? For decades? And you said this sentence: "It will only fail if the long term future is significantly than the long term past."
I sure wouldn't. I'm betting you wouldn't either.
In other words, back testing is not sufficient on its own. And historical data is not the only thing we have and the only way to evaluate things. That was my only point, and it's relevant to all investing strategies, not just this one.
It does have good overlap with buy and hold, and it's definitely worth looking into. But the argument of "it backtests well" doesn't sway me nearly as much as "this is the logical reason why it has worked, and will continue to work" (and "psychology" isn't it). Like I said, researching it more is on my to-do list, so I don't have more specific criticisms, just that what I have read has been enough to pique my interest, yet not convince me nearly enough. :)
Thanks for the congrats, very excited. :)