The NCAA’s Death Penalty

You have to respect what NCAA President Mark Emmert was trying to do Monday when he effectively kicked Penn State down to the Football Championship Series for the next five seasons.  It’s his job to enforce the rules and culture of college athletics, and the athletic leadership at PSU really screwed this one up.  Turning blind eyes toward Jerry Sandusky’s hideous sins cost several boys’ their innocence and mental health.

And PSU president Rodney Erickson’s call to pull JoePa’s statue from the stadium while leaving his name on the library was deft.

But did the NCAA over-play this one?  I don’t mean morally, I mean practically.

Let’s separate Sandusky from the question.  That dude should be forced to walk the plank into a tank of almost-starved, lightly-chummed Great Whites.  Or maybe buried up to his chin in the desert, drizzled with honey, and left alone for a pleasant evening under the stars.  Better yet, how about we appoint a two-person committee of Hannibal Lechter and Kevin Spacey’s character from Seven to develop a moral improvement curriculum for Mr. Sandusky?

(You probably can’t tell, but I’m having a difficult time seeing that God wants to redeem Sandusky with the same passion as he does yours truly.  I’ll work on that.)

Let’s also separate the pending criminal charges for the living guys who covered up the abuse reports.

What I’m wondering is whether the NCAA itself is in trouble with this call. 

The fact of the matter is that even though the “WE ARE” nation is trying their best to put on happy faces right now, their football program is at the very least in a deep, deep hole.  And they may never get out of it.

PSU football was Paterno.  Bill O’Brien is probably a great guy but athletes went to PSU because Paterno won a lot of games, went to bowls, and sent kids to the NFL.  O’Brien is still untested as a college football head coach, and he just lost 20 scholarships and any hope for post-season play for 4 years.  Heck, he didn’t even recruit the stars they have now.  Why should kids like Silas Redd stay put when they’re getting calls from dozens of coaches to jump ship?  This could kill Penn State football. 

You might say, “Ho, hum.  We can all do with a little less college football.  So what?”

My question is: Who, exactly, can do with a little less college football?

The physics & chemistry majors whose brand new mass spectrometer arrived courtesy of the 19 year old kid that just caught a fingertip pass at the back of the end zone, making 100,000 otherwise docile men scream like preteen girls?
 
How about the Poly Sci prof who gets to teach a single section of 14^th Century Papal Policy, while “struggling” to crank out a single article every other year?  He might want to thank the 70 year old dude 8 blocks away that just peeled himself out of his $80 seat to buy two $60 hoodies for the grandkids.

Maybe the Title IX recipients could do with a little less college football.  I’m sure the women’s golf team is self-sustaining.  What’s that?  It’s nowhere near self-sustaining?  Hmm.  How about field hockey?  Tennis?  Swimming?

Perhaps university presidents, whose schools are somewhat more likely to receive state tax-payer funding if they have successful football programs?  No, I’m not making that up.  Read about it here, if you want (warning: this one involves math).

Indianapolis Star sportswriter Bob Kravitz recently described this issue—dealing too sternly with the big business of college football—as letting the genie out of the bottle.  I think grabbing a tiger by the tail is a slightly better metaphor, but either works.

Here’s the zinger: membership in the NCAA is voluntary.  It’s been a successful near-monopoly, but all it takes is a few large teams to feel like they’ve had enough.  Penn State starts talking to Southern Cal, who checks in with Ohio State, who then passes the message on to Florida, and so on.

As much as I respect what Emmert wanted to do with this one, part of me wonders whether the NCAA just instituted its own death penalty.  Heck, if the NCAA goes, maybe student athletes would finally start to be fairly compensated for their generous contributions to their university slop troughs.

What do you think?

The Economic Impact of the Affordable Care Act

There are all sorts of reasons why you might want to force someone to buy health insurance.  You might see it as a way of providing for the health care needs of poor people.  You might think that the “free rider” problem is a beast needing to be slain.  You might just enjoy making other people do things—you’re just sort of an authoritarian at heart.  

You could also believe, as President Obama does, that the individual mandate aspect of the Affordable Care Act will be a clear economic positive.

Well.

If that’s your conviction, I want to offer a few challenges:

1.     If the “larger pool” succeeds in driving average costs down, it can do so, actuarially, only by shifting costs from those who need health care services to those who don’t.  In essence the individual mandate converts the health insurance industry into a type of pay as you go system, like Social Security.  But even that benefit is only temporary: we have no reason to assume that Americans will on average now desire to live shorter lives, eat healthier foods, exercise more, adopt truly preventative behaviors, experience catastrophic accidents less frequently, sue their doctors less frivolously / be awarded less silly punitive damages, etc.  

2.     The negative impact on the medical device industry can’t be overlooked—how does the excise tax affect capital formation and innovation in what has been one of our areas of comparative advantage?
 

3.      I’m also not clear on the impact on small and mid-sized businesses: maybe they join pools and their premiums decline, or maybe they look at their average total cost per employee (e.g., the employer component of plan premiums) rising and decide to pay the $2k / head fee and drop the plan altogether.  In that case, can we be sure that state Medicaid pools can handle the increased enrollment?  

4.      Finally, hospital stocks were up after the Supreme Court’s decision because they have greater assurance that the ACA solves their bad debts problem.  But pharma was down (increased use of drugs still facing patent expirations + restrictive FDA = zero incremental enthusiasm), as were the insurers (these guys went for the grand bargain ostensibly because they would add a boatload of new low risk customers), and likewise the device manufacturers. 

Societal preferences aside, all of this sums to a murky economic impact at best, in my view. 

Push back--how do you see the economics of it? 

Is Materialism Dying?

No, probably not.  But here are two perspectives (neither of which is particularly new) as to why a purely physical cosmology is worth questioning deeply.

Ethical Motivation: where does our sense of right and wrong come from?  How does a purely materialist view of human origins account for self-transcendence?  Why, for instance, do we tear-up at stories of a young Marine jumping on a grenade to save the lives of his buddies at the cost of his own?  Why is greed bad but charity laudable?  Why do we value courage over cowardice, particularly in circumstances when retreat offers a much surer path to survival and therefore, the ability to pass on our DNA?

Here’s a short video of Leah Lobresco—a 2011 Yale grad and erstwhile atheist blogger—describing how she came to faith through an awareness of her innate ethical yearnings.  For those of you who were “razed” Catholic, this might just rekindle some hope.

Quantum Mechanics:  I read The Hidden Face of God by Gerald Schroeder last winter.  It’s mind blowing stuff, really—made me wish I’d never given up on science in school.  Schroder puts the sub-atomic world in a helpful scale to begin mulling the question of matter: if we were able to expand the nucleus of an atom to a sphere 4 inches in diameter, the electrons would be orbiting (at ~ ¼ the speed of light) about 4 miles out.  That means that something like 99.999% of the physical universe isn’t actually matter, but the space between matter (or energy).  You can’t jam your finger through a bunch of iron atoms in their solid state, but it’s not because there's this dense material preventing you from doing so.  It’s because of that odd little, but really strong force "tethering" the nucleus to the electrons.  

Moreover, what can we say about the strong and weak nuclear forces,electro-magnetic force, and the force of gravity; these 4 rules, these inviolable principles of nature, which never stop working?  At a minimum, I think we can say they, not the apparent material around us, form the basis of physical reality.

Keith Ward, whom I had the pleasure of hearing speak at General Theological Seminary during the spring of ’94, takes this sub-atomic discussion further.  You can view it here.  It’s pretty long, but well worth it.  

Here are the haunting questions from Ward’s lecture: what if all that sub-atomic junk (e.g., protons, neutrons, electrons) wasn’t actually matter itself?  What if the whole of our experience is the perception of inviolable rules—of wisdom, as Schroeder puts it—in action?  What does that mean for consciousness?

Neither of these are proofs for God’s existence, mind you—I gave up on that quest years ago.  They do suggest that what we commonly perceive to be the bedrock of reality may not actually be that.  

I’d also love to see somebody tackle the link between the fundamental laws of physics and consciousness / innate, selfless ethical yearnings, if that’s possible.

In the end, I suppose what I feel most from these two trains of thought is a new appreciation for God’s immanence. And that’s pretty cool, in a contemplative sort of way.      

What if Wisconsin Wasn’t About the Money?

Citizens United is to lefty political types what my son is to his three sisters: the ultimate target for blame-shifting.

Michael McConnell offers another explanation, which you can read here.

Now, I’m not saying that money doesn’t affect political races.  After all, why else would rational politicos spend so much on smear ads?  But, if you believe the CNN exit poll which showed that 86% of Wisconsin re-call voters had made up their minds before May 1 (i.e., before the major ad spending ramped up), it’s probably fairly safe to say that there is at least a point of diminishing marginal returns to money’s influence.

Maybe Wisconsinites deserve more credit than the left or right is giving them.

Maybe the high ROI from political ads just wasn’t there.

Maybe the recall was just a dumb idea, based on hyper-inflated fears and widely promulgated but utterly ridiculous notions of justice.

Maybe getting a 100% match on your pension contribution and paying 1/8 of your health insurance premium cost aren't such bad deals after all (maybe it was really a matter of "Who Moved my Cheese?").

Maybe curtailing the ability of government to secure its existence and perpetuate its growth through self-funding mechanisms is in the best interest of Wisconsin’s residents.

Maybe, just maybe, democracy was working in the land of cheddar: not because it's an inherent good, but as a reasonably fair and thoroughly practical solution to bad governance.  

Or maybe it’ll always be my son’s fault, despite any evidence to the contrary.

Denial: a River Running through the White House

The May jobs report released this morning by the Bureau of Labor Statistics wasn’t as strong as any of us had hoped it would be.
 
Well, actually, it was awful. 

The expectation was for approximately +155,000 new jobs.  The actual number was +66k.  The unemployment rate reversed its trend and ticked up to 8.2% in May from 8.1% in April.  With favorable labor market conditions (more in a moment), we should have been adding 300-400k per month in this recovery.    

Labor Secretary Hilda Solis could only blame congress for not doing more during her interview on CNBC.  She also repeatedly pointed out that the economy had created millions of jobs since the president took office, attempting to put 2012’s dramatic slowdown into a type of perspective.  Even Alan Krueger, Chairman of President Obama’s Council of Economic Advisors can’t resist the urge (pressure?) to blame prior conditions, and keep blindly following the president’s prescription for growth. 

In other words, the pain isn’t our fault, but to the extent that anyone has benefited from job growth, the Obama administration deserves credit, oh and you really need to let us keep keep pulling more of the same kinds of levers we've been trying.

Please.

Let’s get some things straight:

1.      The government does not create private sector jobs.  Period.  The government can borrow money and spend that money on projects (so called “investments”), which may, or may not, have a positive impact on the decisions of private sector employers to hire workers.

2.      To the extent that we’ve had positive economic growth and a better hiring environment, it is because those private sector job creators were incentivized to hire people by the prospect for increased profits.

3.      Government intervention in the economy can only create incentives or disincentives for private sector employers.  Government operates at the margin, but it is never the primary reason for growth or contraction, for increasing or decreasing unemployment rates.

4.      You’ll hear more about QE3 now, but the Fed’s hands are tied.  The Fed creates more dollars (POOF!), then buys more bonds from banks, giving the banks cash to lend; the banks look for credit-worthy corporations and consumers who want loans; banks can’t find nearly as many credit-worthy borrowers many as previously and when they do, those corporations don’t want to borrow because they have no idea what the rules of the game are, and they’re not going to spend money on expanding (i.e., building stuff and hiring people) until they can confidently work a 5 year strategic plan; the banks have do something with their cash, so they park it at the Fed, which earns them 25 bps.  Right back where we started: bupkis.    

5.      Congress could spend even more money (which it doesn’t have) in the hope that it will incentivize private sector employers to hire people, but there is still no guarantee that any businesses will actually want to hire anybody.  Nor do we have any indication that the federal government knows where to spend the money once it borrows it.  One of the main lessons from Solyndra was that the smartest private equity guys are just not employed by the federal government.   

Let’s imagine we’re playing Monopoly and you land on Boardwalk.  You pull out your $400 and tell me you’d like to buy it.  I say “Sure! But, I need to tell you that some of the rules have changed.  First of all, the price may say $400 on the card, but it’s actually $500.  Also, if you want to put up any houses or hotels on it, you need to know that it’s going to cost you something more, but I’m not yet sure what either the additional cost per house or limitations on the number of houses will be.  Did I mention that I've printed up some more Monopoly money for my use?  Also, your Chance cards may not be valid...I'll get back to you.”

Would you keep playing Monopoly with me if I pulled that kind of stunt?  Of course not.  

Yet that’s the presumption of all of this nonsense from Washington: we can change rules, raise costs, point fingers, borrow beyond sanity, generate trillions of new dollars from thin air, invest in private enterprise despite an utter lack of expertise, and all of this is going to incentivize rational entrepreneurs to hire people.

Please.

Sir Winston Churchill famously said: “The Americans will always do the right thing…after they’ve exhausted all the alternatives.”  For the sake of the unemployed folks out there, let’s hope we’re getting close to doing the right thing.

Grow Our Way Out? Sure, but How?

Henry Aaron is a pretty smart guy--anybody who gets a Ph.D. in economics (or any other field, for that matter) from Harvard has to be pretty sharp.  Now, it's true, Aaron did his research training when the old version of Keynesianism reigned freely, before it was discredited by stagflation.  But he's had 35 years to adjust his conceptual framework.  And, you don't get to write for the Brookings Institution if you're a goofball.

Right?

Here's Aaron's recent post at Brookings.  It's not that long and it doesn't involve math, so don't be intimidated.

The essence of his argument is that as long as Congress doesn't screw things up, we won't have any debt problem.  By screwing things up, Aaron means forestalling the expiration of tax cuts and slowing federal spending.  


Aaron makes some cogent points, like his assessment of the depth of the most recent recession, and when he describes how badly we need tax reform.  Of course he makes some other points that betray his yearning to play Robin Hood because...well, dadgummit...I'm not sure why he wants to play Robin Hood.  It must just be one of those things that feels right to people who don't value analysis.

Let's look at Aaron's central thesis.  As I've argued before, we still stand a chance of growing our way out of the mess we're in.  On this point, Aaron and I agree.  But that's where our agreement stops.  Aaron's entire 'analytical' basis for claiming that we just need to keep spending and let taxes go up is a CBO projection: "According to projections of the Congressional Budget Office, the currently-large U.S. budget deficits will shrink to manageable levels once the United States returns to full employment."

Where to begin?

CBO projections are notoriously volatile; how could they not be?  Besides, even though there are plenty of dunces in Washington, there are a lot of really smart people also--if this whole thing were really as simple as prudently responding to the CBO's projections, there wouldn't be any problem.

But Aaron's main problem is that his argument begs the question whether and how the U.S. returns to full employment.  His confidence in our return to full employment also assumes a satisfactory standard of living when we get there.   There is some historical precedent for this belief.  See the chart below.

Beginning in roughly 1930, and really taking off in 1942, the Federal Government ran up huge annual budget deficits which accumulated into a massive debt of  >120% of GDP in 1946.  But then, from 1946 into the 1970s, the economy grew us out of this tight spot.  The extent to which technological innovation and manufacturing raised the American standard of living over the three decades after WWII was spectacular.

I think there are at least four main reasons why Aaron's assumption that history will / should will repeat are wrong:

1.  Manufacturing capacity / capability is totally different.  At the peak of our indebtedness immediately following WWII, the U.S. was without an economic equal, and not by a little bit.  I mean by light years.  Britain, France, Germany, Russia, Japan, and Italy (China had been devastated by Japan's brutal occupation, too, but they were not a major economic power in the 40s) each had their manufacturing capacity decimated by the war.  In contrast, American manufacturing plants were totally intact and were in fairly short order able to convert their production lines from military goods to industrial and consumer products (really helpful if you're trying to rebuild a planet).
2. Not only were American plants not bombed out, but the largest increase in debt between 1942 and 1946 supported fixed capital investment.  In other words, we had even more manufacturing capacity in order to build stuff after the war than we did before the war.  As we learned (painfully) with President Obama's 2009 'stimulus' initiative, not all government spending is equally effective.   
3. Even more significantly, a much higher percentage of those countries' young men--the principal laborers--had been killed or disabled by the war.  Germany's military deaths as a percent of its January 1, 1939 population were 8%.  Russia's military deaths (hardly the whole story) were 6% of the population.  Japan's military deaths were 3%, but total deaths in Japan were about 4%.  The U.S.?  Military deaths were just 3/10ths of 1% of the population. 
4. Lastly, to the point about this being the wrong time to constrain government spending, consider the level of federal debt in December 1941: it was barely 50% of our economic output.  The increase in deficit spending for social and stimulus programs of the early depression years was significant in percentage terms (public debt rose from ~ 20% of GDP to ~ 40%, during the first half of the 1930s), but it paled in comparison to the massive leveraging to finance the war.  All of that is to demonstrate that deficit spending won't have the same impact now as it did back then, because we're already swimming in debt.  Even if we knew how to pursue the most effective stimulus spending right now, we're inescapably racing against the ticking debt bomb. 

Needless to say, things are very different now than they were then.  Emerging Asian economies are already growing much more quickly than ours is.  Our superior standing in education is slipping globally.  We export massive amounts of intellectual capital every semester in the form of newly-minted graduates in technical fields.  Our corporate tax code is uncompetitive.  Far from aiding production as they did near the beginning and middle of the post-war period, the Baby Boomers are now retiring.  A flood of new regulations stifles capital investment. And the wonderful recent run of productivity gains cannot continue at this pace indefinitely.

The question Aaron should be asking, but isn't, is: why on earth should we expect the path out to be the same as before?  Instead, Dr. Aaron remains in denial about the structural basis of our current unemployment problem.

America is not great economic powerhouse simply because we proclaim it to be such.  What's made the American economy great are specific disciplines and values, things like education, hard work, reward for risking and innovating, the rule of law, and competition.

Grow our way out?  Sure, but only by competing like we never have before.

Investment Advice (In Case I Get Hit by a Bus)

A couple of years ago, I decided to write a letter to my kids in case I should step off the wrong curb, on the wrong day, in front of the wrong city bus.  It's basically a list of life principles I hope they adopt, written from the perspective of a Dad who would have shared the advice with them had he been around when they wanted to hear it and were old enough to really get it.   

I'm enjoying this little blogging project.  I don't do with with the sense that I'm really any good at it.  Blogging about important current topics is sort of my lame-o public service effort and, selfishly, it helps me learn.  Analyze before advocating; don't trust something just because it's been published; go back to the primary sources; critical thinking can't be outsourced (even if you don't feel like you do it well now, it's not that hard to learn); truth is almost always better than politeness; under no circumstances is it excusable to root for the Yankees, and all that stuff.

Needless to say, I'm not a professional blogger.  I'm not a real economist either: teaching night school at a local college is an avocation, sort of like leading backpacking trips.  Actually, now that I think about it, with what I get paid to teach, it's similar to the backpacking guide thing in at least one other way.

What I am, professionally, is an investor.  It's good work.  I love my business partners and what we do for the people who've hired us to manage their money.  I also love sharing with people the truths (and 'not-truths') about investing I've learned over the years.  One of my all time favorite movie scenes is in the Wizard of Oz: Toto pulls back the curtain to reveal that the Great and Terrible Oz is just a little old guy with a really slick machine.  

Back to the bus thing...

This is sort of an open letter to anyone who's curious about how the business and discipline of investing really work, written from the perspective of a guy who loves sharing what he can with people he cares about, and who otherwise might not get to share it with them before he meets his maker.

Or, if that sounds a little too gloomy to you, think of it as my Jerry Maguire memo.

1. Buy low, sell high.  No, I'm not being cute.  This principal is so basic, yet so easily forgotten, even by professionals.  How to apply it appropriately and consistently is a longer and much more detailed discussion.  But, if all you do when you invest is repeat 'buy low, sell high' to yourself, you'll do better than a lot of people.
2. When it comes to wealth accumulation, there is no substitute for living below your means and investing what you don't spend.  Every single investment strategy there has ever been pales in comparison to the shear power of saving money.
3. If you should accumulate much, be generous and ready to share it.
4. Invest with the realization that you do so to meet some specific, tangible need(s) in the future.
5. If you're seriously considering buying an annuity, may I suggest a .38 snub nose instead? It's much quicker, and far cheaper in the long run.  OK, OK, that was over the top.  I'm just kidding.  Annuities are loaded with fees, very lucrative to the selling broker, and because people in the insurance industry are allowed to call them 'guaranteed' (Hint: make sure you understand the basis of the guarantee), they've been flying off the rack lately.  Truthfully, you can construct (or have constructed for you) effectively the same portfolio as the one underlying an annuity, and incur a WAY lower expense in doing so.
6. There are really only 2 varieties of investment assets: financial assets and real assets.  Financial assets can be further divided into equity and debt (e.g., stocks and bonds).  You value financial assets by discounting their future cash flows.  Real assets are things like gold, vacant land, timber, and other commodities.  Real assets are valued only by supply and demand because they don't have a series of future cash flows associated with them.  Derivatives (e.g., options and futures) are just contracts to buy or sell (simplification, but roughly true) one of the two types of investment assets.
7. If your advisor wants you to buy gold, ask him "What is the fair value for one ounce?" and see what he says in light of #6.  (Hint: the demand variables are: industrial demand, consumer demand, hedging demand, and apocalyptic retail investor demand.  If you really want to have fun, ask your advisor to break the current price per ounce of gold down into those four categories.)
8. If you can read only one book about investing, it should be The Intelligent Investor, by Benjamin Graham.  If you want to read more, read Berkshire Hathaway's shareholder letters, What has Worked in Investing by Tweedy Browne, Creating Shareholder Value by Alfred Rappaport, and Financial Statement Analysis by Leopold Bernstein.
9. If you need someone to sketch out a strategic financial blueprint for you, hire a financial planner.  If you need help with tax preparation and planning, hire a CPA.  If you need someone to lend you money, hire a banker.  If you need someone to manage money for you, hire an investment manager.  Many advisors have added investment management to their product offering simply because they think it'll be a profitable revenue stream.  Investing (like the other professions mentioned above) is a distinct skill-set.  Hire an expert for the specific need you have.
10. In contrast to conventional wisdom, there is actually a ton of money to be made trading--but not by you.  Unless you're a professional trader yourself, you'll get your eyes gouged out (trader lingo for "not be quite as profitable as you'd hoped"--these dudes are not baby bunnies) by some really smart guys who know both sides of a market better than Kim Kardashian knows mascara.  
11. Stocks are not companies.  Great companies can have over-priced stocks and mediocre companies can have attractively-priced stocks. 
12. Mutual funds are diversified investment portfolios.  If you own several mutual funds in your portfolio, you're probably over-diversified, in which case you'll end up with performance that is much like that of the theoretical 'market portfolio'.  If you truly just want to track the market portfolio, you can do so with a really cheap fund from Vanguard, and bypass the needless activity of some clown who thinks he's earning his keep by switching your 3.5%  mid-cap international equity allocation from one fund to another. 
13. Profits go up either because sales also go up, or because companies become better (more efficient) operators.  When you invest, be certain you (or your manager) know(s) which of those is likely to happen and exactly how it's likely to come about.
14. When interest rates go up (oh, and, they will be going up), bond prices have to adjust down.  It's a common conceptual error, but rising interest rates simply are not a good deal for traditional bonds. 
15. Risk does not equal standard deviation.  Risk is the probability that your financial assets won't meet the financial needs identified in #4.
16. The brokerage industry is populated by "relationship managers."  Most of them really have no clue how to invest your money well.  But on average, they're extremely personable, and because most of you don't really want to do the work it takes to evaluate them thoroughly, you'll probably hire them primarily because they make you feel ______ (wealthy, successful, smart, important, etc.), or because they give you boxes of golf balls.  If your relationship manager sounds like he knows what he's talking about, 80% of the time it's only because he's done a great job of memorizing the quarterly talking points put out by the boys at the home office in ______ (New York, Boston, Chicago, etc.)  Sorry to be so blunt, but it's the truth.  
17. Sustainable, growing dividends will remain an important, positive return signal, almost regardless of tax laws.
18. With respect to the concept of 'market efficiency', it's not so much a stock market as it is a central repository of individual stock markets.  Some of those markets are very efficient and some are very inefficient.  
19. Your true cost for investment management is your "all-in"cost.  Calculate the all-in cost by adding the fee you pay to your advisor + the commission charged by the custodian + any internal management fees assessed by the mutual funds / separate account managers.  Make your advisor add them up for you and justify them.  Layers of investment fees are lethal to long-term performance.
20. "My Dad told me never to sell ______ (Ford, McDonald's, Boeing, etc.)" is not an investment strategy.  What if your dad had told you to never sell GM?  Do yourself a favor: take out an old picture of Dad teaching you to ride a bike and appreciate him for what he actually was to you.   Then, figure out for yourself whether you should still own the thing Dad told you never to sell.
21. When investing in bonds, ask "How do I know I'll get my money back?"  When investing in stocks ask "What will make this investment appreciate?"
22. Done well, investment management is a professional service, not a means of financial product distribution.  The brokerage business grew to be very profitable when firms figured out how to achieve scale.  The way they did that was to hire a few smart guys (see #16) to construct 'model portfolios', which could then be sold through an army of relationship managers (also #16).  It's a great deal for building a profitable brokerage firm, but it's a lousy deal for investors, each of whom have unique needs and circumstances. 
23. Portfolio structure is just as important as portfolio return (see #4).
24. If during a discussion about your portfolio's poor performance, your advisor uses the prepositional phrase "in it for the long-term" twice, it's a sure sign that he understands neither the factors driving asset prices, nor why you're invested.  If he uses that same phrase three or more times, reach across his desk, grab his crib sheet (see #16), stuff the whole thing in your mouth, chew it thoroughly, and spend the rest of your meeting pelting him in the forehead with spitballs while repeating alternately "Uh-huh" and "Sure, Skippy" whenever he stops for a breath. 
25. On the other hand, during a discussion about your portfolio's poor performance, your investment manager might look you in the eye and say something like: "We blew it.  We identified a gap in our analytical process (then describes the gap) that led to this poor performance and we've taken steps (then details the corrective measures) to mitigate the risk of this happening again.  I'm sorry this happened.  We hold your trust in high regard and hope you'll let us have a shot at earning it back."  If you do hear something like that, give him the chance he asks for, and be prepared to give him at least one more chance after that.  You're in good hands.
26. Purchasing an asset because its price has recently been going up is not investing; it's momentum trading (see #10).  Purchasing an asset just because its price has recently been going down is not value investing (see #11 and #13). 
27. Investing in publicly traded capital assets like stocks and bonds is not gambling.  Investing involves analytical work.  When someone suggests that it's gambling you can be sure that either 1) he doesn't get how markets price information, 2) he doesn't understand the price-value dichotomy (see #11), or 3) he doesn't understand either of these. 
28. With respect to #24 & #25, "poor performance" never means simply that the price of a security went down.  If you can't handle that possibility, buy CDs. 
29. Free cash flow generation is the single best indicator of management capability.
30. Registered representatives (a.k.a., 'brokers') are held to a suitability standard, registered investment advisors are held to a fiduciary standard.  Caveat emptor.