• Abraham Lincoln, March 6, 1860: "When one starts out poor, as most do in the race of life, free society is such that he knows he can better his condition... I am not ashamed to confess that twenty-five years ago I was hired as a laborer... I want every man to have the chance... The prudent, penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land, for himself; then labors on his own account another while, and at length hires a new beginner to help him. This, say its advocates, is free labor - the just and generous, and prosperous system, which opens the way for all - gives hope to all, and energy, and progress, and improvement of condition to all. If any continue through life in the condition of the hired laborer, it is not the fault of the system, but because of either a dependent nature which prefers it, or improvidence, folly, or singular misfortune."

• Paul Johnson, Enemies of Society: "Throughout history all intelligent observers of society have welcomed the emergence of a flourishing middle class, which they have rightly associated with economic prosperity, political stability, the growth of individual freedom and the raising of moral and cultural standards. The middle class, stretching from the self-employed skilled craftsman to the leaders of the learned professions, has produced the overwhelming majority of the painters, architects, writers, and musicians, as well as the administrators, technologists and scientists, on which the quality and strength of a culture principally rest. The health of the middle class is probably the best index of the health of society as a whole; and any political system which persecutes its middle class systematically is unlikely to remain either free or prosperous for long."

• President Ronald Reagan, June 22, 1983: [He listed many items as evidence of the new U.S. prosperity] "But there's an easier way to tell that our program works, that recovery is here, and that the country is beginning to sparkle: suddenly our critics are no longer calling the program Reagonomics."

• Forbes, "Pfizer: Company of the Year," Jan.11, 1999: "The lush [Pfizer] profits will be plowed back into the lab to produce even more bumper crops in the future. This is in sharp contrast to other drug houses whose mergers have been motivated in good part by a desire to cut overlapping research costs. 'Everyone in the industry has 20% earnings growth, but they're making their earnings by cutting expenses,' [Pfizer CEO] Steere says ... 'That's a death spiral.' At Merck ... earnings in the first nine months of 1998 rose 14%, compared with only 11.3% in sales; that's partly because [R&D] rose only 1.8% in the same period. At Pfizer [the CFO] worries earnings will get too high. 'It's a sign we're doing something wrong.'"

• John Miller, 1771, Of the Origin and Distinction of Ranks: Miller, a student of Adam Smith, moral philosopher and author of Wealth of Nations, explains the moral foundations of free trade and a capitalistic market economy; how economic servitude and fawning dependence create a stultifying view toward personal freedoms and the dignity of man in general. "In this situation, persons of low rank have no opportunity of acquiring [wealth] or of raising themselves to superior stations and remain for ages in a state of dependence. They naturally contract such dispositions and habits as are suited to their circumstances. They acquire a sacred veneration for the person of their master and are taught to pay an unbounded submission to his authority. They are proud of that servile obedience by which they seem to exalt his dignity and consider it as their duty to sacrifice their lives and their possessions in order to promote his interest... The farther a nation advances in [free, open markets, open opportunities for all] ... the lower-people in general thereby become more independent of their circumstances.is capricious humour ...  They begin to exert those sentiments of liberty which are natural to the mind of man and which necessity alone is able to subdue. In proportion as they have less need of the favour and patronage of the great, they're at less pains to procure it. That vanity which was formerly discovered in magnifying the power of a chief is now equally displayed in a sullen indifference or in a contemptuous and insolent behaviour to persons of a superior rank and station." [Editor's note: It should be noted that this was written during a period called "The Scottish Enlightenment," a time not only of expanding free markets and growing wealth of the Scottish middle-class, but, also in direct consequence, an explosion of intellectual Scottish achievement that became the envy of England and Europe!]

• Stephen Wright: "How come it's a penny for your thoughts, but you have to put your two cents' worth in? Somebody's making a penny."

• John Maynard Keynes: "Investment is an activity of forecasting the yield over the life of the asset; speculation is the activity of forecasting the psychology of the market."

• Benjamin Graham: "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting this requirement are speculative."

• Warren Buffett: "If you're an investor, you're looking at what the asset -- in our case, businesses -- will do. If you're a speculator, you're primarily forecasting what the price will do independent of the business."

• Phil Fisher: "Investment success depends on finding companies that can sustain above-average growth, in both sales and profits, over a period of several years. Short-term results are deceptive."

• Joe Ricketts, founder of Ameritrade: "Trading often and heavy is not something that makes you a lot of money. That's contrary to my own interests, but it is the truth."

• Robert T. Kiyosaki, Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money -- That the Poor and the Middle-Class Do Not!: "A job is only a short-term solution to a long-term problem... Most people never see ... opportunities because they're looking for money and security, so that's all they get. The moment you see one opportunity, you will see them for the rest of your life... The poor and the middle class work for money -- the rich have money work for them. [The rich buy income-producing assets such as dividend-paying stocks and real estate rental properties.]"

• Motley Fool: "Rocker initiated a short position on Allied Capital originally... His stated reason was that Allied did not 'mark-to-market' their portfolio since the portfolio was comprised of smaller non-publicly traded companies. Allied is a quality company with a long history of growth.... Allied fought back, even coining the term, You can't re-state a dividend."

• Motley Fool:

S&P 500 average P/E on reported earnings  
Since 1996            29.6          
Since 1989            23.9
Since 1935            15.5
Today                 28.7
On 2003 estimates     30.0
On 2004 estimates     18.0

"...what's most interesting is how the market's average P/E has risen... Why?... Today, a majority of Americans own stock... [once] the market was [mainly for] the rich... The point is, value is not static, and when we measure current valuations against history's prices, we should consider how we've changed... the market ... reflects what all its participants deem is right." [Editor's note: this is a good point. Today (2003) the Baby boomers are still saving for retirement, still driving share prices ever higher with their need to put their old-age money somewhere; today, historically sky-high P/Es seem "right" to us -- but this demand for stocks, market visionaries warn, will fall off and charge in the opposite direction in about ten years when the Boomers, more often than not, will be selling stocks to fund retirement living -- the Market Crash of 2013? I think this scenario has some merit and is one more reason to adopt a dividend strategy like the one I outline in my "Library of Investment Articles" (see above).]

• Jeffrey D. Saut:  "We have learned the hard way that the markets can stay irrational for longer than we can stay solvent."

• Mathew Emmert, Dec. 1, 2003: "We as investors have a tendency to dramatically overestimate the amount of risk that's required to achieve respectable returns. Indeed, at a certain point, each incremental unit of risk that you take on actually produces a smaller amount of return. That's because as you start to swim deeper and deeper into the risk pool, you have fewer winners and more failures impacting your overall success rate... BusinessWeek has pointed out that the return of the Nasdaq ... underperformed the S&P Utility Stock Index from 1971 through 2001 -- 11.2% vs. 12%, including dividends... the real importance here lies in the fact that the utility investors took on substantially lower risk to achieve their return, making the difference on a risk-adjusted basis much more meaningful... historically speaking, dividend-paying investments have offered the most compelling risk-reward tradeoff available."

• Richard Lehmann, Forbes, 10-15-03: "... credit agencies [Moody, S&P] confuse ratings meant to measure a company's ability to service its debts with its equity growth prospects... [i.e. a company may be finding it difficult to initiate a surge of growth, but this does not mean that its survival is in question; bondholders are most concerned with this latter item which relates to the servicing of debt.] They ignore the fact that slow growth requires less capital, i.e., debt and is, therefore, not at all negative for current debt holders... From our study of bond defaults, I can assure you that the risk difference between AAA and BBB is huge compared to the difference between BBB and BB. The yield difference is clearly more a function of differences in demand for the securities based on perceived notions of risk versus the reality. I have always contended that had the powers on Wall Street known the actual default histories when they defined investment grade, they would have drawn the line between investment and non-investment grade below the BB level... Adding to the bias is the recent alarming trend of rating agencies migrating toward doing analysis of a company's prospects rather than evaluating its debt-servicing capabilities... credit agencies seem to pride themselves on who is the first to downgrade, a process that over time has resulted in over 50% of all debt issuers now being rated below investment grade. That means half of corporate America has been lumped in the junk heap... I often describe BB rated issues as low to medium risk... Because of the low ratings, these issues are often under-priced which is exactly where the opportunities for profit lie."

• BusinessWeek Online, Dec. 19, 2003: "If You're Missing Dividend Stocks, You're Missing Out ... investors are thinking about dividend stocks the wrong way. They're treating them as if they were the boring country cousins of go-go growth stocks. They'd do better by regarding them as bonds that pay out increasing amounts of income over time -- as well as healthy capital gains over the long haul... $10,000 invested in the [S&P 500] in 1982 would have started yielding more each year than the Lehman Brothers Aggregate Bond Index after just a decade. That's because dividends tend to rise over time, while the interest paid by bonds remains fixed. Over 20 years the stock portfolio would have paid out dividends totaling $18,166, beating the $17,836 earned by the bond portfolio. What's more, the value of the stock portfolio would have grown more than sixfold, to $62,558 -- despite the 1987 crash and the 2000-03 bear market."

• Ayn Rand: "Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people's savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments... Every movement that seeks to enslave a country, every dictatorship or potential dictatorship, needs some minority group as a scapegoat which it can blame for the nation's troubles and use as a justification of its own demand for dictatorial powers. In Soviet Russia, the scapegoat was the bourgeoisie; in Nazi Germany, it was the Jewish people; in America, it is the businessmen... If some men are entitled by right to the products of the work of others, it means that those others are deprived of rights and condemned to slave labor."

• Sir Thomas Gresham, c. 1560: "When depreciated, mutilated, or debased coinage (or currency) is in concurrent circulation with money of high value in terms of precious metals, the good money automatically disappears."

• Will & Ariel Durant, The Lessons of History: "Socialism in Russia is now [1968] restoring individualistic motives to give its system greater productive stimulus... Meanwhile capitalism undergoes a correlative process of limiting individualistic acquisition ... and redistributing wealth through the 'welfare state' ... The fear of capitalism has compelled socialism to widen freedom, and fear of socialism has compelled capitalism to increase equality. East is West and West is East, and soon the twain will meet."

• Kasia Moreno, Forbes, "Companies With Successful Growth Strategies": "Is a company worth the expected growth premium wired into its stock price? Beyond the Core, a new book by Chris Zook.. tells investors how to choose stocks with the right growth strategies. In his search for factors that underlie successful growth strategies, Zook compared 12 pairs of companies. Each pair consisted of two companies in the same industry which started off the decade (1990 to 2001) with similar revenue and earnings, but ended up with very different financial trajectories due to their contrasting growth strategies. One set of companies saw their stock prices increase almost tenfold, while another one by only threefold. What were the main differences in the new business initiatives between the slow and fast value creators? One key factor, according to Zook: When a company moves into a new line of business, it should closely relate to the firm's core operations. In seven out of the 12 pairs of companies Zook studied, the companies that lagged in creating value for shareholders did so because they moved too far away from their area of expertise... Five out of 12 company pairs analyzed by Zook were influenced by the correlation of their new business lines to profit pools. This was apparent in Zook's study of two drug different drug wholesalers: Cardinal Health and McKesson. Cardinal grew by buying businesses that were in services which helped Cardinal's clients or vendors manage pharmacies or help package drugs. In this way, Cardinal created profit pools for itself, by helping its suppliers cut costs. Its main rival, McKesson, acquired a health care software business, HBO & Co., which was disastrous. Cardinal's stock price grew at an annual rate of 30% over the decade ending in 2001, and McKesson by only 7%..."

• Peter Lynch: "The secret to making money in stocks is not to get scared out of them."

• Joseph Battipaglia, Jan. 11, 2005, BusinessWeekOnline: "More often than not, it's time in the market, not timing the market, that makes a difference."

• Diefendorf & Madden, 3 Dimensional Wealth: "Studies have shown that too much money, especially in the hands of very young adults, can do more harm than good. Often there is a lack of self-esteem that goes along with inherited money... of guilt and shame... [and] the lack of humility that accompanies an opulent life-style... Lack of initiative and drive can be a result... Warren Buffett puts it this way: 'I want to leave my children enough so that they can do anything they want but not enough so that they don't have to do anything at all.' ... If money alone is left to children, without being left in a wrapper of personal wealth (wisdom) and social wealth (values), more often than not your children will end up with financial problems..."

• Peter Lynch, Beating The Street: "The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row."

• Benjamin Graham: "Obvious prospects for physical growth in a business do not translate into obvious profits for investors... Most new issues [IPOs] are sold under 'favorable market conditions' - which means favorable for the seller and less favorable for the buyer." [Editor's note: or as one market observer once commented, "Business owners know the right time to sell."]

• Peter Lynch, Beating The Street: "As a place to invest, I'll take a lousy industry over a great industry anytime. In a lousy industry, one that's growing slowly if at all, the weak drop out and the survivors get a bigger share of the market. A company that can capture an ever-increasing share of a stagnant market is a lot better off than one that has to struggle to protect a dwindling share of an exciting market."

• Stein & DeMuth, Yes, You Can Be A Successful Income Investor, 2004: "For years, people assumed that the stock market would solve their income needs, since it has historically compounded at a nominal rate of about 10% per year... The problem is that for any short-term span, [a typical stock portfolio] can't be relied upon to provide investors with the total returns they've come to expect over the long run. There can be periods of 20 years or even longer -- possibly much longer -- when the total return from investing in the stock market is zero... your authors argued that these eras of low return from equity investing aren't random events, but tend to follow periods when stock values have risen in excess of what might be justified by their historical fundamentals. Unfortunately, we now live in the shadow of such a period. The run-up of financial markets during the 1990s was unprecedented, and while stocks have fallen from their bubble highs, they are still pricey... This means that over the coming 20 years, the total returns from equity investing could fall significantly short of their historical yearly average of 10%... [Look at] the annualized 10% total return that stocks have historically offered.... throw out the profit due to inflation, which cuts the real return down to less than 7%. This remaining amount has historically consisted primarily of dividends -- about 5 percentage points in all. 70% of the stock market's real return has come from the dividends that stocks have paid. Why is this a problem? Because today, the dividend yield is abysmally low: Instead of 5%, it's a measly 1.8%. This implies a total inflation-adjusted stock market return of closer to 3 or 4% going forward. In other words, we're well advised not to rely entirely on the growth model to buy groceries and pay the rent."

Source: www.thechartstore.com

• Nick Murray, June 2006: "A speculator is first and foremost a trend follower. In his view of the world, that which has risen spectacularly in price -- oil from under $20 to over $70, gold from $250 to $615 -- will continue to rise even further. That is, it will go up because it has gone up. The more the price of anything rises, the more attractive it is to the speculator who ... thinks that price and value are directly related... [The] commodities bubble is ... an episode of inflation brought on by an epic wave of excessive monetary stimulus which is itself in the last stages of getting wrung out of the system... commodity inflation was born of excessive monetary stimulus and will soon die of monetary restraint."

• Motley Fool: "... in any given year, the IRS can tax you only on what you earn. Your mutual fund manager takes a cut of everything you have ... year after year after year. In other words, even if you don't make a cent in [a given year], be prepared to hand over" a portion of your capital in fees.

• Motley Fool: "Siegel's constant ... Siegel's research shows that the average real return of stocks is between 6.5% and 7.0% over virtually any long time period you care to measure, starting in 1802...".

• Todd Harrison: "A wise man once said that trading, in its most basic form, is an attempt to capture the disconnect between perception and reality."

• Dan Ferris, October 2006: “Automatic Data Processing (ADP) handles millions of paychecks every week. It earns two days' worth of interest on the taxes it withholds for clients. Since we’re talking about more than $800 billion worth of taxes, the interest is a lot of money. Last fiscal year (ended June 30), it came to $549.8 million, about 6% of ADP’s revenues and 35% of its net profit. Not many people want to spend the time and money necessary to switch from ADP to another payroll processor. That means ADP is going to have access to interest on tax withholdings indefinitely.”

• Ibbotson Associates, Stocks, Bonds, Bills, and Inflation 1997 Yearbook: "One dollar invested in large company stocks at year-end 1925, with dividends reinvested, grew to $1,828.33 by year-end 1996: this represents a compound annual growth rate of 11%. Capital appreciation alone [i.e., without dividends reinvested] caused $1.00 to grow to $58.07 over the 72-year period, a compound annual growth rate of 6.2% ... The average annual dividend yield was 4.6%." Editor's note: It is vitally important to understand that 97% of the long-term total growth from stocks comes from dividend reinvestment in more shares!!

• Herb Greenberg, Dec. 15, 2006: "To repeat what I said on Kudlow & Co. on Thursday night: 'It's said you should never argue with a crazy person ... [nor with] a crazy market.' And that pretty much describes where we are -- in a market that hangs by the thread of oil until it decides the risk of rising oil prices is irrelevant; in a market that hangs by the thread of the latest economic indicator, until it decides that indicator is irrelevant; in a market that one week is enthusiastic about the Fed's likelihood of cutting interest rates and the next week enthusiastic when it looks like a cut is less likely... Not to worry: All that really matters is 'global liquidity,' a catch-all to explain the inexplicable. 'Unnatural,' [says] Jeff Saut of Raymond James... 'Markets typically go up, correct by 25%, and then re-rally if the are going to trade higher,' he writes. 'This, ladies and gentlemen, has not been the case recently as the averages have 'unnaturally' vaulted higher without so much as ANY correction.'"

• Forbes, "High On Loews," Feb. 26, 2007: "Jim Tisch is in no hurry to invest Loew's cash hoard. He recalls what he learned from his father. 'When we buy a business we don't think about how much money we can make -- we think about how much we can lose.'"

• Mark Skousen, Feb. 26, 2007: "The stock value of Berkshire Hathaway has increased a remarkable 1,400-fold since the late 1960s, beating by far the S&P 500. But ... Koch Industries ... has advanced 2,000-fold in book value since the early 1960s ... That’s when Charles Koch (pronounced coke) began working for his father’s company ... Koch Industries is the world’s largest private company ... Charles Koch confessed that being private is one of the secrets to his company’s success. 'Most publicly traded companies focus on short-term quarterly earnings reports and, therefore, have a hard time maximizing long-term value. If we had been a public company, I would have been fired long ago!'”

The Dow Adjusted For Inflation 1925-2007

• William Nygren, Portfolio Manager, Oakmark Funds, 3/31/07: “… what we see and hear in the financial media: ‘Mortgage Armageddon’ or ‘Dow suffers worst single day decline in four years.’ One needs to remember that the goals of the media and the serious investor are not well-aligned. The media wants to create excitement… [I recently saw] a reality show investment competition where the best performers avoided getting ‘voted off the island.’ These contests can be exciting and probably even help ratings. They shouldn’t in any way, however, be confused with real investing. The timeframe is so short that stock movements aren’t tied to business fundamentals, and rewarding the largest return without imposing any cost for losing money encourages the most risky behavior…. Time magazine headlined their March 12th issue with: ‘Is the Stock Market Getting Too Risky?’ The Wall Street Journal told the story of an individual who bought some stock at $98 a share. The investor said ‘Before I could blink, the stock had sunk to $96, so I started selling at a loss.’ Many have become convinced that investing requires constant monitoring of news and price moves and believe that a serious investor needs to be a hyper-active trader. These reactions are exactly the opposite of our response at Oakmark. In the absence of negative fundamental news, if a stock falls from $98 to $96 it has become more attractive, not less. Likewise, the time to ask if the market is getting too risky is before, not after it declines. Following that drop, I had several calls from reporters, all asking the same question: ‘The market is down 5%, what does that mean?’ My answer, which not surprisingly wasn’t used by any of them, was that five-year compound annual returns were now going to be 1% higher than they were before the market fell. That answer didn’t convey quite the level of fear they wanted…”

• David Merkel, 7-6-07: "...[wisdom requires one] to take some risks, because if you wait for the market to correct before you enter, you will miss profits while waiting, and the correction could be a long time in coming."

• Anthony Conroy, 7-13-07: “Fear and greed are what drives the market over the short term, but earnings and dividends ultimately matter.”

• http://bigpicture.typepad.com: read more

105 Years of Dow Jones Industrials

• Ken Fisher, The Only Three Questions That Count: Investing By Knowing What Others Don't: "Some say Warren Buffet Buffet is the greatest money manager of all time. I don't think he is a money manger at all... He is the CEO of a very successful insurance company owning a few stocks and often takes companies private when he wants... [W]hen Bershire takes over a company ... it's impossible to know what the return is on that investment after that point because it's simply internalized into Berkshire. Therefore, you can't tell individually if it was a good investment or not. All you can see is how Berkshire Hathaway stock does which is largely driven by its insurance operations... There is virtually a religion around Bershire stock and Mr. Buffett... it hasn't done well recently. In the past decade, its returns would have placed it in the 51st percentile relative to the stocks in the S&P 500."

• Ken Fisher, The Only Three Questions That Count: Investing By Knowing What Others Don't: "Armed with degrees, certifications, and appreticeships, professional investors embark into the world dispensing advice and so-called wisdom, all while overwhelmingly they lag markets... Some become media pundits... most of what you hear is post-game analysis. Only rarely will a pundit really stick his or her neck out to predict what happens next... [T]hey don't last long. If they could [successfully predict the direction of markets] they would go into money management instead of punditry because there is infinitely more money in succeeding in money management. For example, as of 2005, 39 of the Forbes 400 were from the broad world of money management -- nearly 10% of the total! How about media personalities? Only Oprah got there that way. No financial pundits. Not one."

• James B. Stack, InvesTech Research, July 28, 2007: “The U.S. economy is now in the sixth year of the fourth longest economic recovery of the past century. This is when things can go wrong – and usually do. I wish it weren’t so, and I wish I didn’t have to say it. But today’s economy is on a collision course with a recession. And the most probable starting point is the fourth quarter of 2007. Because the stock market typically leads the economy by six to nine months, you can guess what that means for Wall Street this year. For the most part, we’re in uncharted waters when it comes to the housing sector, and the boom-to-bust unwinding has been underway for over 18 months. Then there’s the unpredictable Dow Industrials. The DJIA has closed higher in five of the past eight trading days, but declining stocks outnumbered advancing stocks in seven of those eight sessions. That type of negative breadth divergence has occurred only 15 times in 75 years – the majority of which were in bear markets. On Monday of last week, the DJIA hit a record high while declining stocks overwhelmed advancing stocks by a 2:1 margin. That ominous divergence has never occurred in the past 75 years of market history. Divergences are also appearing in major indexes, as the headline-grabbing DJIA has risen over 1000 points in the past five months – but the small-cap Russell 2000 Index has slipped lower. If that isn’t a flight to quality, I don’t know what is! As a consequence, I am moving to a full bear market defensive mode.”

• Ken Fisher, The Only Three Questions That Count: Investing By Knowing What Others Don't: Commenting on why the first two years of a president's term are often weak market years: "Nobody Can Predict What A Genuine Phony Will Do Next... The market dislikes ... uncertainty.... a new president ... presents the market with tremendous uncertainty... A president knows his party is likely to lose relative power to the opposition in the mid-terms, so whatever onerous legislation he would hope to pass ... he must try to get it passed in the first two years... The biggest and ugliest attempts at redistribution of wealth, property rights, and regulatory status (which is property rights) almost always have occurred in the first half  of presidents' terms... Anything threatening property rights raises risk aversion and scares the heck out of capital markets... the market doesn't like politically forced change."

• Ken Fisher, The Only Three Questions That Count: Investing By Knowing What Others Don't: (1) What do you believe that is actually false? (2) What can you fathom that others find unfathomable? (3) What the heck is my brain doing to blindside me now?

• Peter Brimelow, 8-5-07, on Richard Russell, age 83, editor of Dow Theory Letters since 1958: "... getting up at 3:15 a.m. ... preparing to write the several thousand words of commentary he posts every day that the market is open... Stocks are now right at or below the point at which Russell recanted his bearishness. Torturing thought: at this point in his brilliant career, could Russell have been a contrary indicator?"

*********************************************************************

• Todd Kenyon, 12-17-07: “James Montier … said that ‘pursuing contrarian strategies is a little bit like having your arm broken on a regular basis.’ In the short term there is no discernible or quantifiable difference between being wrong and being a contrarian... if you are concerned about short term volatility, then you are speculating, plain and simple… it will be impossible for observers to tell if our strategies are sound for many months or even years. That's why it so important to focus on process instead of short-term outcomes.”

• Paul Kedrosky, 12-13-07: “Even though the stock market has rightly been called the triumph of the optimists, with bulls stomping bears over and over for one hundred years, stock market bears not only haven't gone away, but they generally have the most compelling arguments. Their points seem so damn plausible, level-headed, empirical, and reasonable, while bulls come across as starry-eyed idealists.”

• John Bogle, Founder, Vanguard Funds: "I do not believe that [investment advisors] can identify, in advance, the top-performing [fund] managers -- no one can -- and, I'd avoid those who claim they can do so."

• Charles Ellis, Investment Policy: How To Win the Loser's Game: "In investment management, the real opportunity to achieve superior results is not in scrambling to outperform the market, but in establishing and adhering to appropriate investment policies over the long-term -- policies that position the portfolio to benefit from riding with the main long-term forces in the market."

• Larry Swedroe, Wise Investing Made Simple: "Perhaps the most amusing example of overconfidence might be the results of the Mensa [top I.Q. individuals] investment club... The June 2001 issue of Smart Money reported that over the prior 15 years [the club] returned just 2.5%... Warren Smith, an investor for 31 years, reported that his original investment of $5,300 had turned into $9,300... [the S&P 500] would have produced almost $300,000... Overconfidence can be very expensive."

• Warren Buffett: "We continue to make more money when snoring than when active."

• Charles Dow, 1901: "The man who begins to speculate in stocks with the intention of making a fortune usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes gets rich."

• Walter P. Schuetze, SEC Accountant:  “Today’s financial statements are so complex and arcane as to be incomprehensible ... Financial statements are not fit for their intended use."

• Emerson: "It requires a great deal of boldness and a great deal of caution to make a great fortune, and when you have it, it requires ten times as much skill to keep it."

• Warren Buffett: “I'd be a bum on the street with a tin cup if the markets were always efficient.” Alexander Green: Even if markets are efficient, investors are irrational.

"The only wealth in this world is children."

      Michael Corleone, The Godfather III