The Daily Dow
Tuesday, July 1, 1997
by Robert Sheard
LEXINGTON, KY. (July 1, 1997) -- Among the many arguments for avoiding mutual funds and full-service brokers, the one that stands out the most in my mind is the issue of who should receive the fruits of your savings. If you're paying a fund manager one or two percent a year in fees and getting below-market returns, do it yourself. If you're paying a money manager a couple of percentage points a year and your returns after fees are disappointing compared to the market, do it yourself.
There have been countless stories about the vulgar displays of wealth enjoyed by Wall Street wizards who have fleeced their clients in fees while recording lousy returns. (There are many fine managers, of course, but they don't make for as colorful stories.) One such vivid description comes to us in fiction, which as we know, is often simply a well-told version of truth.
Tom Wolfe describes the excesses on Wall Street in the following passage from his 1987 book, The Bonfire of the Vanities:
'How these sons of the great universities, these legatees of Jefferson, Emerson, Thoreau, William James, Frederick Jackson Turner, William Lyons Phelps, Samuel Flagg Bemis, and the other three-named giants of American scholarship -- how these inheritors of the lux and the veritas now flocked to Wall Street and to the bond trading room of Pierce & Pierce! How the stories circulated on every campus! If you weren't making $250,000 a year within five years, then you were either grossly stupid or grossly lazy. That was the word. By age thirty, $500,000 -- and that sum had the taint of the mediocre. By age forty you were either making a million a year or you were timid and incompetent. Make it now! That motto burned in every heart, like myocarditis. Boys on Wall Street, mere boys, with smooth jawlines and clean arteries, boys still able to blush, were buying three-million-dollar apartments on Park and Fifth. (Why wait?) They were buying thirty-room four-acre summer places in Southampton, places built in the 1920s and written off in the 1950s as white elephants, places with decaying servants' wings, and they were doing over the servants' wings, too, and even adding on. (Why not? We've got the servants.) They had carnival rides trucked in and installed on the great green lawns for their children's birthday parties, complete with teams of carnival workers to operate them. (A thriving little industry.)'
The obvious question to ask, of course -- an analog to the now-famous "Where
are the client's yachts?" -- is Where were their clients living? On Park
and Fifth? Not likely. It's reasonably safe to assume that their clients'
net worth failed to increase at the same pace as their own. Hold managers
accountable, Fools, whether fund managers or private managers. There are
good ones out there, of course, but they're usually lost in a sea of mediocrity.
Accountability, accountability!
(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 +1 5/16 36.38 GM + 11/16 56.38 CHV +1 1/2 75.44 MMM -1 1/4 100.75
Day Month Year
FOOL-4 +1.63% 1.63% 3.83%
DJIA +0.54% 0.54% 19.76%
S&P 500 +0.66% 0.66% 20.29%
NASDAQ -0.26% -0.26% 11.40%
Rec'd # Security In At Now Change
1/2/97 120 3M 83.00 100.75 21.39%
1/2/97 153 Chevron 65.00 75.44 16.06%
1/2/97 179 Gen. Motor 55.75 56.38 1.12%
1/2/97 479 AT&T 41.75 36.38 -12.87%
Rec'd # Security In At Value Change
1/2/97 120 3M 9960.00 12090.00 $2130.00
1/2/97 153 Chevron 9945.00 11541.94 $1596.94
1/2/97 179 Gen. Motor 9979.25 10091.13 $111.88
1/2/97 479 AT&T 19998.25 17423.63 -$2574.63
CASH $767.60
TOTAL $51914.29