The Legend

Many of you know Bo as a star at DFA over the past 20 years but before that Bo became a football legend at the University of Washington.  Bo is being honored at the Husky game this weekend and this recognition is well deserved.  I just wanted to share this  article I dug up giving you a few highlights his storied career.

Bo Cornell was a hulking football player who ran over people, his fearless style allowing him to move easily from Roosevelt High School to theUniversity of Washington to the NFL.

He had a name suited for toughness, but only because his younger sister, Cindy, couldn’t pronounce Bob.

The Miami DolphinsBenny Malone, however, even had trouble spitting out Bo.

In 1974, Cornell was two games into an NFL position switch with the Buffalo Bills — from backup fullback to starting linebacker — when he chased after Malone on a running play moving away from him. When the Dolphins tailback finally turned up field, the pursuer delivered a massive blow.

“I hit him in the head and we both went down; he was out cold,” Cornell recalled. “He had to be carried off the field on a stretcher. I chipped a big chunk of tooth. I felt I should have been carried off, too.

A lineman told me that was the hardest hit he had ever seen in his life.”

Today, Cornell travels in a far less violent world. At 56, he’s a slighter man with a mild demeanor. He’s into finance, a regional director for California-based Dimensional Fund Advisors. An Issaquah resident, he’s been married to his high school sweetheart, Jeanie, for 33 years and has two grown children.

Cornell started playing football when he was 8, advancing to each level with the same players, among them Jim Currie, Rick Smith, Steve Grassley, Bob Vynne and the late Hugh Klofenstein. As Roosevelt seniors, these guys had become such a cohesive unit they won seven of eight games and captured the 1966 Metro League championship, beating Sealth 14-13 in the Thanksgiving Day title game.

Cornell was durable, lifting weights at a downtown gym up to six times a week, starting when he was 15. He got the tough yard whenever needed but was equally impressive in the open field. He returned a punt 66 yards for a touchdown against Lincoln. He scored from 79 yards out against Shorecrest. Recruiters everywhere sought him out.

The UW was not an automatic choice. Cornell pursued an Air Force Academy appointment, thinking he might become a pilot. Yet he was nearsighted and failed a two-day physical at McChord Air Force Base. He signed a national letter of intent with Stanford and placed it in a mailbox, only to have immediate second thoughts. His father retrieved it from a postal worker.

At the UW, Cornell played for two bad teams and one good one, but was consistent throughout. He scored 20 touchdowns and rushed for 1,250 yards in his career. When his team went 1-9 in 1969, he lost just three yards all season while running for 613 in a wishbone offense. Demonstrating his versatility, he caught 33 passes as a senior when the Huskies switched to a passing attack.

The pros wanted him. Cornell was the Cleveland Browns‘ second-round draft pick and spent two seasons as a special-teams player. The Bills traded for him and asked him to move from offense to defense in his second season in Buffalo, considered a radical move at the pro level.

“That was one of the things I was most proud of,” he said. “I had to learn everything on the run. I hadn’t played any defense since high school. To me, it was just football. I wanted to play. I knew I could do it.”



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The Bad News

The demise of Active Management has resulted in a brighter future for all investors (the good news), but the bad news is the continued business practice of paying commission to sales people creating an obvious conflict of interest. The incentives are structured to maximize revenue for Wall Street and those masquerading as advisors. I realize I am not telling you something you don’t already know.

I have written about this problem in the past. The system drove me out of the brokerage business after a very brief stay. That was almost 30 years ago, but last May I wrote and shared with you well documented evidence that nothing has changed. It’s part of the culture and too profitable for every one but the investor.

You should go back and review those two posts. I pointed out the banning of this practice in the U.K. and Australia while recognizing the difficulty of reforming the system here in the U.S. Wall Street simply has too much, well paid for, influence over our legislators.

What brought my attention back to this issue now are the current attempts to pass legislation that would create a fiduciary responsibility for Wall Street’s sales people to put their clients interest ahead of their own. (It would be simpler and more effective to simply ban commissions, but I’ll take what we can get for investors.)

Paul Ryan is the lead defender of commissioned based investment advice telling us that the government has no business telling brokers how to charge for their services. He claims 7 million middle class Americans will be unable to get appropriate investment advice. Sorry Paul, but thanks to the Internet, everyone has access to investment advice. This blog alone has more appropriate investment advice than you could ever get from a sales representative striving to maximize their own income. There are numerous articles regarding this subject you can access with Google. Brokers are claiming that most of them already put their clients interest ahead of their own. According to the research I referred to above, that is far from the truth.

So this is the bad news. It’s one more example of the control Wall Street has over our lawmakers. Paul Ryan receives a major portion of his campaign funds from Wall Street so he is simply acting in his own self-interest. I wish however, he could sit in (anonymously) on a couple of sales meetings at a local brokerage office in his own state of Wisconsin. He would then understand what Wall Street is doing to those he represents. He is supposed to be on their side and not a Wall Street lapdog.


Filed under Advisors, Home, Investments, Investors

Good News-Bad News

Time for all you advisors and your clients to break out the champagne and celebrate. It has taken almost 30 years but it appears that many of the proponents of active management are “throwing in the towel” and searching for new sources of revenue. Thirty years ago, virtually every dollar invested in mutual funds, was managed by Wall Street firms claiming they could “beat the market”.  Management fees were high and in most cases you had to pay an 8% commission just to get started.

What follows, are direct quotes from Bloomberg Business Week dated June 27, 2016.


“Top executives at some of the largest fund companies, including Larry Fink at BlackRock and Gregory Johnson at Franklin Resources, are warning that a reckoning is coming. The pain is focused on companies that emphasize active management, picking stocks and bonds in an effort to beat the market.”

“Over the past five years passive funds, attracted a net $1.7 trillion dollars in the U.S., while active funds saw a slight outflow. The active managers haven’t been able to show they deliver a performance edge for their higher fees. In the five years ended in December, only 39% of actively managed equity mutual funds beat their benchmark indexes, according to Morningstar.

“Fink, who runs the world’s largest money manager, said at a conference on May 31 that the shift into indexing will not only continue but will be massive.”


I just wanted to share this with you advisors who have played no small role in bringing this about. You can truly say you’ve made a difference. It was not easy, especially in the beginning, but with the truth on our side, I knew we would win. We have, and I love it.

So what is the Bad News? The “bad news” is the persistence of commissioned driven investment advice and the obvious “conflict of interest”.  The “market” showed the failure of active management. A battle Wall Street knew it would eventually lose.

But hiring “salespeople” to provide investment advice is still a very profitable business strategy. It’s just too profitable to let “ethics” get in the way. It’s both sad and shameful. More next week……………..!


Filed under Advisors, Home, Investments, Investors

“You Must Be Kidding”

Back in the early 70’s, I began my business career as an auditor with Arthur Andersen & Co. It was at times a bit boring, but I always felt a real sense of purpose knowing I was doing my part to keep publicly traded companies honest when reporting their financial results. The independent Financial Accounting Standards Board, or FASB, established the rules. The rules themselves were known as Generally Accepted Accounting Principles or GAAP. It was important for every publicly traded company to get an “Unqualified Opinion” from their independent audit firm when reporting their annual financial results. A “Qualified Opinion” would have a negative impact on the Company’s share price.

Our GAAP was considered the gold accounting standard for the world. After all, could any investor trust the management of publicly traded companies to be completely objective and honest when reporting their financial results?

Well apparently, the SEC doesn’t believe that independently audited Financial Statements in accordance with GAAP are all that important in today’s business world. According to a recent article in the New York Times, publicly traded companies are allowed to make up their own accounting rules when reporting their financial results. I’m not kidding. It’s true, as long as they also report results according to GAAP. Can you guess which results are reported to the press and to analysts making buy and sell recommendations to investors?

So how large is the difference between GAAP and MHWT (management’s hype and wishful thinking)? From 2014 to 2015 net income for companies in the S&P 500 was up 6.6% using the MHWT. Using GAAP, there was actually a decrease of 11%. Using their own accounting rules 30 companies managed to turn a loss into a profit.

Apparently there were regulations passed 15 years ago to restrict this creative accounting but the SEC shows no desire to enforce those regulations. I guess this is just one more bit of evidence that Wall Street has too much influence over our elected representatives.


Note: If you want to read the article the title is “Fantasy Math Is Helping Companies Spin Losses into Profits”. (New York Times, April 24, 2016)

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“The Hate Strategy”

I am sure you could think of half a dozen individuals you would like to be our next president rather than Donald Trump. I know I could, but not one of the professional politicians running this year would be on my list. I honestly believe Trump is winning because so many people are voting against the “political establishment” when they cast their vote for Trump. I have written in the past that the day was coming, when no longer will the candidate who raises the most money, be declared the winner long before the votes are cast. That day has arrived and apparently they still don’t “get it.” The flood of money being raised to stop Trump is simply driving more votes his way.

So the media is now starting to play the “Hate Card.” Just read the editorials, look at the political cartoons, and the covers of various magazines. Images of Hitler, Mussolini, KKK etc. are being used to inflame voters passion against this “evil monster.” “He must be stopped!” When the great “propaganda machine” is unleashed, by those who are seeing their agenda fail, mayhem and violence are sure to follow.

They’ve done it before. As a Vietnam Veteran returning home in the summer of 1969 I experienced the hatred the media generated towards all returning vets. We were told to change into civilian clothes as soon as possible and keep our Vietnam experience off our job applications. The media was against the war but their “hate campaign” was towards those of us who fought for our country.

So now they’ve focused the propaganda machine on Trump and anyone who dares to support him. His only support is from “uneducated white males” according to many in the media. I have always loved “The Week” magazine but they have joined the fray. A U.K. polling company claims that 20% of Trump supporters believe Lincoln should never have freed the slaves. So I went to Google and searched “Trumps comments about African Americans” and came up with nothing negative. Yet the media is intentionally trying to pit African Americans against Trump. Maybe it will work, but I believe most Americans are tired of being told by the media, what to think and who should get their vote.


Filed under Home, Politics

The People Have Spoken

Say what you will, but Super Tuesday was the best demonstration of Democracy at work I have seen in a long time.  And —- the “political establishment” is throwing a temper tantrum worthy of a two year old.  Fearful of losing their long held power over the selection of our political leaders, they are in a panic that the American people might have something to say about who becomes the next President.

I read the New York Times every morning to find out what is going on in the world, but this last couple of months it has become more like a Supermarket Rag.  The bias expressed in the editorial section has given me pause in the past, but that is to be expected.  They write what they believe just as I do with this blog.  Unfortunately that bias has become something close to slander and it’s all over the front page of the Times.

Party leaders of the Democratic Party are breathing a sigh of relief today that they may not have to rely on their “Super Delegates” to overrule the people’s choice of a nominee.  The Republican Party leaders (whoever they may be) have a real threat on their hands.  The Party has moved way to the right in their quest for power but ironically the guy winning the nomination is more of a “centrist” than any other candidate of either party.

Voters seemed to have figured that out and realize that Washington will never change if the current ideological war between the parties continues.  When Donald Trump first announced his candidacy I could not take him seriously.  His comments about Mexicans and John McCain were very offensive to me as they were to virtually everyone.  But as I look at his positions on different issues he’s definitely close to the middle.  Holding a press conference last night instead of a “demagoguery pep rally” was very clever.  I listened closely and I must admit, I was impressed.


Filed under Politics

The “great” Debates

In the past I have lamented about people wasting their time watching reality shows such as the Kardashians or Housewives of Wherever. The Networks however, love the genre. The shows cost little to produce and there is no need to hire any real talent.   This is why they love Presidential Debates. They are also cheap to produce, and as with all reality shows, they don’t require a cast of talented people.

Tonight viewers will have the opportunity to watch the next Republican Presidential Debate. In hopes of maximizing the ratings, Fox has been creating as much hype as possible by “marketing” the show as a “smack-down” between Megyn Kelly and Donald Trump. Many of the things Donald Trump says are offensive to me, but I do like it when he goes after the “political establishment.”

As I write this, Trump has decided not to participate in tonight’s debate. I do not know what his motives are but do we really need to hear over and over again how each candidate is going to save America. “When I am President yada, yada, yada.” Perhaps we need to hear it twice, just to make certain there is consistency, but after that they should all go back to their day jobs, especially the governors and senators who are already on the public payroll.

These never ending campaigns are perhaps one of the reasons so many people choose not to vote. It’s not just exhausting for the candidates but for the voters as well. By the time we get to vote, the candidates have so demeaned each other it’s hard to get excited about voting for anyone. So on this occasion, I agree with Mr. Trump, this debate, ten months before election day, is probably a waste of everyone’s time. There are more important things to do.

I, for one, won’t be watching. My valuable time will be spent more constructively, walking my dog Joe.

P.S.   Michael Bloomberg must have read my last post: The Donald Phenomena.


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