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Wall Street Steward Blog

Truth & $hare: 9/10/2013

<Lots of times I get asked “did you see that article in the WSJ? What do you think about it?” In this series I will provide color commentary to articles I have read recently. Sometimes agreeing with the author, and sometimes disagreeing…I promise to always offer my opinion on the subject. If you have recommendations for future editions, please let me know.>

Time for edition two…

PASSIVE MANAGEMENT IS A MYTH

Today, it was announced that Goldman Sachs, Nike, and Visa would replace Bank of America, Hewlett-Packard, and Alcoa in the Dow Jones Industrial Average. Read about it here have commented before on the ongoing debate between “Active Management” (relying on investments managed by professionals who seek to outperform the overall market) and “Passive Management” (simply using a buy and hold methodology using low cost investments).

This type of change in the Dow illustrates my major argument with passive management – that it doesn’t really exist. Indices change their composition – they bring in new holdings and kick out old holdings.  So, therefore, just buying an index is only truly passive if the index NEVER changes composition. Whether it changes once every 2 years or once every month is irrelevant – they DO change, and so do active managers. Arguing that the one that changes the least trumps the more active one is simply semantics. Both are active….one just less so.

Start with a target return for your portfolio, and hire someone you trust to help you reach those goals.  Getting caught up in the minutiae is counterproductive.

TSA SPEEDS UP SECURITY LINES – FOR SOME CASH

My issue here is not with the TSA trying to speed up security lines, but the arrogance of people that complain about the security lines.  _*You should be ashamed of yourself.*_ Do you remember 9/11? Nobody seemed to complain about nearly being strip-searched in the months following 9/11…we all wanted to be safe, no matter how long it took.

I still feel that way. I travel a lot. I stand in security lines quite often, and I N.E.V.E.R. try to rush the TSA officers doing the inspection. They SHOULD take their time. If they are rushed, they are more likely to miss something, and the risk of that is too catastrophic to imagine.

Why do more people want to speed up these lines? Is it really that big of a deal to have to get to the airport an extra 30 minutes early? Do you really believe that the TSA can search us just as thoroughly in half the time? Me either, so STOP complaining and be patient.

COLLEGE RANKINGS

US News & World Report released their college rankings for 2014 today. See the list here.

I believe they do a solid job with these rankings, so no complaint there. The reason I posted this is to throw a jab at my SEC friends. The ACC has 7 schools in the top 50…the SEC has 1.

Thank God for Vandy, or else you all would have been shut out! You might be a better football conference than the ACC, but that is because we are actually required to go to class.