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You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer. You cannot further the brotherhood of man by destroying the rich.

                                                                                        Abraham Lincoln

Library of the Editor's Investment Articles: Strategies of the World's Greatest Investors

Jeremy Siegel: The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New

Mergent's Dividend Achievers: Creating Wealth With Companies That Raise Their Dividends Every Year

Dividend Aristocrats: Superior Returns From Companies That Have Increased Theirs Dividends for 25 Years or More

Harry Browne: 16 Golden Rules of Financial Safety

Motley Fool: Planning Your Retirement Withdrawals

Adam Hamilton: Essays

Lowell Miller: The Single Best Investment: Achieve Lasting Wealth With Low-Risk Steady-Growth Stocks: "The single best investment is a select group of stocks of highly steady, moderate growth companies that offer consistent returns, minimal risk," and increasing dividend growth, allowing you to "create your own private 'compounding machine' from which you can realistically project multiplying your net worth again and again for five, ten, and twenty years into the future."

Historical Charts of the Dow Jones

Scott MacKillop: Seven Deadly Sins of Financial Consulting

Jim Puplava: Dividends: The Investment Constant

Motley Fool: The Importance of Dividends

Stanley & Danko: The Millionaire Next Door: Secrets of America's Wealthy

Gregory Baer & Gary Gensler: The Great Mutual Fund Trap

Robert G. Hagstrom: The Essential Buffett

Warren Buffett: Berkshire Hathaway Annual Reports

Wisdom of Warren Buffett: Excerpts from the Annual Reports

Warren Buffett: Scale Back Expectations

John Mauldin: Hope Is Not A Strategy: "...if stocks were yielding 6% in 1982, and are now yielding 1.8%, should we expect to repeat the 13.9% of the past quarter-century? Of course not. On average, 5% a year came from capital gains attributable to multiple expansion - over and above what growing earnings and dividends contributed. Take that away, and we're at 9%. After all, that's what we'd have earned if dividend yields still matched the average yield of the quarter century. But, even that's too aggressive. Dividend yields are 2% lower than their average during this span and 4% lower than the starting yield of 1982. Take 2-4% away, and we should expect 5-7% from our stocks in the years ahead."

Philip A. Fisher: Master Investor of the 20th Century

Thomas Sowell:Who's Rich?

The Money Masters: How Banks Create The World's Money - "I have unwittingly ruined my country" - President Woodrow Wilson, after having been tricked into signing into law the Federal Reserve Act of 1913.

David Dreman: Investor Delusions

Mark Hulbert: How Long is Your Long-Term?

Milton Freedman: Free to Choose

Sir John Templeton's last investment advice before his death

Personal Statement #39: Wealth Creation and Preservation: An All-Weather Investment Strategy Offering Wealth Protection During Uncertain Times, Almost No Matter What Happens * Inflation * Deflation * Prosperity * Depression * Chaos

Personal Statement #52: Wealth Creation and Preservation: The Greatest Threat Facing Retiree-Investors Today! How a 'Safe' $1 Million Bond or Annuity Portfolio Can Be Reduced to Zero In Only 30 Years!

Personal Statement #58: Wealth Creation and Preservation: Part I: Yes! You Can Be Debt Free! How The Average American Family Can Wipe Out All of Their Debt - Credit Cards, Car Loans, and Home Mortgage - In Only 7 to 9 Years!

Personal Statement #59: Wealth Creation and Preservation: Part II: Yes! You Can Save $1 Million! How The Average American Family Can Save $1 Million In Only 15 Years!

Gil Morales and Chris Kacher, July 5, 2011 : "In the U.S., failure to raise the debt ceiling will end the country’s ability to continue its 'Ponzi scheme' of issuing ever more Treasury debt to cover principal and interest payments on existing debt... The rapid expansion of debt denominated in any particular currency eventually leads to the devaluation of that currency, be it the U.S. dollar [or] the euro... the long-term trajectory of such currencies will always be to the downside. After all, those who have studied their economics know that no government in the recorded history of humankind has ever succeeded in overcoming an astronomical debt burden by debasing its own currency and allowing inflationary forces to run their debilitating course. Yet, this seems the exact tactic the economic regimes in the United States and Europe are currently resorting to... Investors should recognize the inherent long-term weakness of the major fiat currencies, and begin diversifying at least some percentage of their funds into hard assets."

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 ...  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, 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: "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."

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!'”

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.”

Ken Fisher, The Only Three Questions That Count: Investing By Knowing What Others Don't: "Some say Warren Buffet Buffett 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 Berkshire 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 Berkshire 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 apprenticeships, 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?"

Larry Swedroe, 9-05-07: "[For 120 years] or so we had no real rise [i.e. above the inflation rate] in housing prices. [Last 30] or so they rose much faster -- perhaps a bubble fueled by easy credit and rising prices so everyone wants in. If prices retreat to their long term mean that alone could cause home prices to fall significantly. The agencies don't consider this type of situation as we have never had such falling prices, at least not since the Great Depression. Remember in last 30 years real prices rose almost 2% per annum, after 120 years of 0 real growth. We could fall a long way just to return to a trend line. Not saying that will happen, just what could happen."

Roger Nusbaum, 9-11-07: "According to the Stock Trader's Almanac, the Dow Industrials peaked at 381.17 on September 9, 1929. It bottomed on July 8, 1932 at 41.22 - about a 90% hit. So that is probably the biggest fear out there: another 90% drop in the market. Something to keep in mind is that the Dow was up 80% in 1933, almost 40% in 1935 but it fell 27% in 1937. Although the market did not take 381 back until 1954, from the period between 1929-1954, there were 15 up years and 11 down years."

Andy Abram, 11-18-07: “In the early 1980's we were going through another financial crisis. Then, as now, times were becoming very difficult. However one major difference was the fact the government did not come in and bail out the financial institutions. They were allowed to fail. There was a proverbial wringing of excess. Possibly due to this wringing of excess we enjoyed one of the longest running bull markets. Mr. Bernanke and his colleagues have taken a different approach. They have lowered interest rates. In life, as different as things seem to be, many times they are similar. What I am referring to is the case in the late 1980's when Japan's stock market was at a parabolic high. Japanese investors were buying up U.S. real estate assets as well as companies. Easy credit and cheap money were flowing like water… In 1989 the Japanese stock market, which hit a high of approx 39,000, started to implode. The financial strength of Japan started to unravel. The Japanese government thought it was prudent to lower interest rates to bail out the lenders. In retrospect it is very clear that this did not work. For the last 15 years Japan has been experiencing virtually an economic disaster. The Japanese stock market has been down for now almost 18 years and sits at less than half of its former value at 15,154.61. Zero rates did not lead to economic growth! What I have learned from all my years of investing is that anything can happen and PRUDENCE is Paramount to Return. I have had this discussion regarding Japan with clients and not one thinks this can happen in America. After 1929 it took 25 years for the Dow to get back to its 1929 levels. Regardless of your beliefs and bias on the markets, have a plan. It is obvious when your investments and trades work, but more importantly when they do not work out, know when to exit according to your plan.”

Paul Goodwin, 11-18-07: commenting on one's dismay due to a rebounding stock after selling it: "Our advice? Get over it. If you have followed the best sell rules available, your sell was a good one. The quality of the sell really doesn't depend on what happens to the stock after you get out. The quality of a sell is a matter of how well you protected your capital from further risk. There will always be other stocks to put your money in when the trend turns up. But if you lose your money, you can't invest in any of them. Thus, it's better to err on the side of caution and endure the occasional bout of seller's remorse than it is to hold on like grim death to a declining stock and watch it make off with your capital."

Learned Hand, Chief Judge of the U.S. Court of Appeals for the Second Circuit: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the Treasury. There is not even a patriotic duty to increase one's taxes. Over and over again, the courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, and all do right, for nobody owes any public duty to pay more than the law demands."

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.

Dick Morris, It’s Obama spreading panic: "Ultimately, all recessions and depressions resolve themselves into crises of confidence... [President Obama's] every remark and the constant preoccupation of his Cabinet is to heighten the sense of crisis and to escalate the predictions of doom if we do not do as they tell us... he has become a conduit of panic, spreading the mood of desperation from the stock exchange floor to kitchen tables across the world... Why does Obama preach gloom and doom? Because he is so anxious to cram through every last spending bill, tax increase on the so-called rich, new government regulation, and expansion of healthcare entitlement that he must preserve the atmosphere of crisis as a political necessity. Only by keeping us in a state of panic can he induce us to vote for trillion-dollar deficits and spending packages that send our national debt soaring. And then there is the matter of blame. The deeper the mess goes — and the further down his rhetoric drives it — the more imperative it becomes to lay off the blame on Bush. He must perpetually 'discover' — to his shock — how deep the crisis that he inherited runs, stoking global fears in the process... But the jig will be up soon. The crash of the stock market in the days since he took power (indeed, from the moment he won the election) can increasingly be attributed to his own failure to lead us in the right direction, his failed policies in addressing the recession and his own spreading of panic and fear. The market collapse makes it evident that it is Obama who is the problem." 2-26-09

4-03-09: Editor's note: Some of you might be thinking that the recent rise in the stock market is vindication of “credit-card stimulus economics”; that we can spend our way to a great fortune; that socialism, after all, will out. I hate to be the one to break the news to you, but… not so fast. There are many things that can make “the market” rise in the short-term. As Abraham Lincoln once said, there’s no law against being stupid. The great money manager, Ben Graham, commented on why markets move one way or another: “In the short run, the market is a voting machine; but in the long run it is a weighing machine.” Mutual fund managers, who make most stock purchases, can “vote,” can buy shares simply because they believe the market is temporarily “going up,” having gone down too quickly. They will trade this rally, an attempt to secure short-term profits. But in the long-run, the market, as Graham said, is a “weighing machine”; that is, a long term upward market trend can be sustained only by increasing profits of companies represented by the shares in mutual funds. Do not be deceived by any blather to the contrary! Further, never forget Peter Lynch’s dictum: “What makes stocks valuable in the long run isn't ‘the market.’ It's the profitability of the shares in the companies you own. As corporate profits increase, corporations become more valuable, and sooner or later, their shares will sell for a higher price.” This is not complicated. The market is no mystical levitation act. Something … something real… has to support those higher stock prices in the long run. One more thing: I have been an investment advisor for 25 years. And during that time I would frequently quote something else that Lynch once said: “Ultimately, to be an investor in stocks, you have to believe that American business has a decent future, as well as business worldwide, and that corporations will continue to increase their profits. If you are as convinced of this as I am, then you'll never panic in a correction.” This is the first time in 25 years that I am not convinced that “American business has a decent future.” Yes, I’m sure business will continue in some fashion, but, right now, American business, under socialism, is like planting ND crops in rocky soil, with little rain – we can’t expect bumper crops until the weather and the soil improves. Capital, as I told you a couple of days ago, will be, and already is, going on strike. Business people aren’t stupid. They aren’t going to expand their enterprises unless they have reasonable assurance that they will not only be able to retrieve their investment, but also earn a profit. To think otherwise is to live in the unreal Animal Farm world of Washington.

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