Thank you all for signing up at to get your free $20, your free checking account, and the rest. I have now received eighty-four million in referral fees. And will retire Thursday morning.

Wanakee Hill: “As one writer put it, an index fund is like sticking your head in the freezer, and your feet in the oven, stating somewhere in the middle is comfort! When it comes to index funds, why not just invest in the Cisco’s, GE’s, HD’s, and AOL’s without buying the entire index of losers too? (I just listed my portfolio, by the way).”

That would be an outstanding way to have invested. Had I not just received $84 million in referral fees, I would be green with envy. But will these stocks do as well in the future?

If so, then of course you’re right. But these things are often harder to know than you might think. (The companies are likely to do well. But might the stocks be so expensive as to more than take that into account? What if you had to pay double today’s price to buy them? Ten times today’s price? Is there any price at which the stocks would not be a good buy? If so, how do you know today’s price is not such a price.)

I truly do not know the answer. If you believe in the “efficient market theory,” at least with stocks as widely followed as these, then you might argue they are priced “just right,” given all the market knows about them, their prospects and risks. If you believe winners are sometimes buoyed to unreasonable heights by momentum players who will buy at any price, then these stocks might do worse than average at some point. If you believe the best stocks rarely sell for all they’re worth because few are visionary enough to grasp their true potential, then these stocks may be cheap.

These days, I have a hard time accepting that third alternative. And I would point out that when a way of beating the averages becomes so simple and obvious — as with “the Dogs of the Dow” a few years ago — it often fails. (The dogs have been dogs, relatively speaking, these last few years.) But see January 13th’s column, “It is SO Hard” — because it is.

Don: “I enjoyed your January 13th column, especially the line . . . ‘We have lost more than a dime or two with out laser-like intellects.’ While I suspect that you intended the word our instead of out, the slip does add another level of truth to the statement.”

Indeed it does.

Neil Weinreb: “Your column mentioned Barton Biggs’s 1993 prediction of doom. Don’t forget Alan Abelson, whom you also labeled as ‘very smart’ in a column a few months ago. As a brand new investor in 1994, I subscribed to Barron’sas a learning vehicle and prime source of financial information. Big mistake. I was much impressed with the learned Mr. Abelson’s erudition and elegant prose. Unfortunately, I was also much impressed with his advice: DOW 3600, get out while you can, soon to be DOW 3200 or even 2800. I followed his advice for a few years and now see that it cost me several hundred thou in gains. I understand that I am solely responsible for my own investments, but you can see how a novice might be impressed with someone as weighty as Mr. Abelson. How come someone who has been as wrong as he has for as long as he has still have his job?”

Many of the very smartest people on Wall Street have been over-cautious for a long time — Alan Abelson and a fellow named Jim Grant being two whose brainpower fairly glows in the dark — and to me this says two things: First, that it is SO hard to beat the market over a long period of time, no matter how bright or seasoned you are. That was the point of the column. (Hence my preference for a lifetime of monthly investments in no-load, low expense mutual funds, through thick and thin. I know I’m not smart enough to outsmart the market, and I’ve been excessively cautious — at least judging from the today’s vantage point — too.) Second, that a note of caution now might be wise. It’s just when we cannot get over how much smarter we are than the “so-called experts” with all their gray hair — how do they keep their jobs? — that it could turn out there was something to their concerns, after all.

Or as Curly says to Billy Crystal in City Slickers, “Day ain’t over yet.”


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