The Daily Dow
Thursday, May 15, 1997
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (May 15, 1997) -- The tradition of the Fool is one of Shakespeare's most hallowed literary devices in his tragedies. From the clownish gravediggers in Hamlet to the archetypal Fool in King Lear, Shakespeare employed these motley characters to poke fun at, humiliate, and even slap silly (metaphorically, at least) the members of court when they need it to recognize the truth.

Every once in a while, a little moral outrage is called for. And watching the pundits on CNBC recently (my mistake) has pointed to a theme I find hard to stomach. So let me tie my cap on a little tighter and get in the face of the Wise a bit.

A parade of Wall Street types have been pontificating on the "herd mentality" of the little guy, the "passive" investor who marries herself to S&P 500 Index funds and just keeps plowing money into these large-cap stocks.

The attitude of most of these pundits is condescending, the knowing shaking of the heads, the rolled eyes, the arrogance of the "insider" who thinks these passive (read brain-dead) little guys are messing up their game and costing them good returns.

Who do they think they're fooling? Well, duh! If 70% - 80% of the stock funds can't beat the S&P 500 over time (I'm not even picking on bond or money market funds), why would an investor looking at the objective results consider the vast majority of stock funds that do so much poorer and have higher fees?

Sometimes you just want to reach through the screen and shake these guys. "Hey, wake up! When you lose to the market ten years in a row, no wonder investors are turning to Index funds."

Ah well, they'll just raise their mis-management fees, pour a few million into marketing and steal some more hard-earned money from people who believe turning it over to a "professional" is the Wisest thing they can do. We can see this angst among the Wise as a good sign; our message is helping. But there's so much more to be done. "Wisdom and goodness to the vile seem vile; Filths savor but themselves." (King Lear, IV, ii, 38)

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

Stock  Change   Last
--------------------
T    +   3/8   33.13
GM   +   1/8   56.13
CHV  -1  1/4   70.88
MMM  +1  5/8   94.50

               Day   Month    Year
        FOOL-4   +0.42%   1.80%  -2.76%
        DJIA     +0.65%   4.63%  13.73%
        S&P 500  +0.70%   5.06%  13.65%
        NASDAQ   +1.35%   7.36%   4.84%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  120 3M            83.00     94.50    13.86%
   1/2/97  153 Chevron       65.00     70.88     9.04%
   1/2/97  179 Gen. Motor    55.75     56.13     0.67%
   1/2/97  479 AT&T          41.75     33.13   -20.66%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  120 3M          9960.00  11340.00  $1380.00
   1/2/97  153 Chevron     9945.00  10843.88   $898.88
   1/2/97  179 Gen. Motor  9979.25  10046.38    $67.13
   1/2/97  479 AT&T       19998.25  15866.88 -$4131.38


                             CASH    $520.79
                            TOTAL  $48617.92