Tom Knapp: ‘Those reading McCullough’s book on John Adams should try to read an article in Sept. ’01 Harper’s Magazine by Richard N. Rosenfeld called ‘The Adams Tyranny.’ He concludes, ‘…In pandering to the highly remunerative national yearning for heroes, David McCullough denies Americans the critical lessons in liberty and democracy that every history of the Early Republic should teach.”


Will Alford, MD: ‘The quote of the day that came up for me today [they are generated randomly – you don’t all see the same one] was from Paleontologist Jack Horner: ‘It was only 80 years from the time Darwin published On The Origin Of Species until we detonated the first nuclear bomb. In the lifetime of one person, we went from figuring out where we came from to figuring out how to get rid of ourselves.’ My favorite quote is not entirely unrelated, from Konrad Lorenz, the famous zoologist: ‘I think I have found the ‘missing link’ between the animal and civilized man. It is us.’


James Elbeu: ‘I read George Soros’ Global Capitalism and found it refreshing that a billionaire would counter the idea that the free enterprise system is one that serves those who deserve wealth, etc. He says the idea of ‘the magic of the market place’ is stupid. That a lot of people fall between the cracks. His term for the wrong-headed belief that it’s all a perfectly balanced system is MARKET FUNDAMENTALISM. I thought that a great term.’

☞ Fundamentalism of any kind is pretty scary. The free market is spectacular – but even it needs checks and balances.


John March: ‘You write that ‘enterprise, ambition, desire, and invention are good,’ but your support for the confiscatory federal estate tax tells a different story.’

☞ I really doubt this tax has done much to inhibit enterprise, ambition, desire, or invention. Look at the last 10 years. A time of tremendous hard work and exciting innovation, and – certainly – ambition. Yet we had this tax.

Don’t you think it’s all a balance? That exempting 98% of everybody is a good start; that exempting spouses helps; that raising the ceiling to an inflation-adjusted $2.5M or $5M and lowering the 55% to 45% might not be about the right balance to put this issue to rest for a long, long time? I’d sure favor that myself.

Has America really dealt its enterprising, ambitious citizens a bum hand? Is there a better place, on balance, to be enterprising and ambitious?


Kirk D: ‘I have read your book and used your mutual fund calculator. I know you are strongly against managed funds and pro-indexing. However, I would appreciate your analysis of the following [note to readers: you can skip the fine print].

Question: What % interest per year does a manager have to earn to equal S&P 500 if the latter earns 11% per year on average?
y is total money earned at the end of n years;
P is principal amount placed in at time=0;
x is decimal average interest earned per year.

Let x1=% manager has to make
Solve for x1 for different numbers of years.

Here are the surprising results:
If the load fund skims off 6% of your initial principal, the manager will have to average 18,12.4, 11.7, 11.3, and 11.2% for 1,5,10,20, and 30 years. Each of these percentages should be increase by the yearly management fee, let’s say 1.5%. So over 20 years, the manager must make 12.8% to equal the market.

Let’s take an extreme example. If the load funds skims off 50% of your deposit, manager will have to average 122, 27.5, 19, 15, and 13.6% over these same times, plus the management fee.

I spent a few minutes looking up top-rated mutual funds over 10 years.
Compare Smith Barney Agg. Growth Fund A to Vanguard 500 Index
Over past 3 years ending 9/21/01
+25.2% vs. -1.4%
Over 10 years 16.82% (includes effect of max. sales charge) vs. 12.61% (9/30/01)

Over 17 years since inception, SB Agg. Growth has yielded 15.62% including effect of max sales charge. I don’t have S&P for this time period, but doubt it is better. Do you consider SB a flash-in-the-pan?

My conclusions from these data: 1. Front-end loads up to 10% are negligible if you keep the money in 10 years or more. 2. There is a minority of well-managed funds that beat the market by 3-4% over 10 years, and perhaps that much over 20 years. A few minutes of research on the web or a magazine/newspaper will reveal them. What am I missing?’

☞ Nothing! So long as you can identify in advance (incomparably harder than in hindsight) the very few funds that will significantly outperform the averages over the long run . . . and so long as you are investing in a tax-deferred account (because actively managed funds are so much less ‘tax-efficient’ than index funds) . . . you are golden. Another simple solution to the same problem: find a stock that will perform really well in the future (not just one that has done so in the past), and buy it. Works every time.


I’m not saying I agree with every word of this – I like to think the author is being too alarmist. Even so, if you have time, click here.


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