April 14, 1998
Six
Opinions
The Fool on the Beardstown
Ladies
The Importance of
Accountability
by Rick Munarriz
([email protected])
Accountability is at the very forefront of all things Foolish, and that is the one area where the Beardstown Ladies do deserve a round of reprimand.
As a founding investment club Treasurer, I can assure you that the NAIC Accounting Manual offers a simple and logical approach to portfolio bookkeeping. With unit values, similar to a mutual fund's net asset value, the hurdle to clear in calculating how the sum of club holdings fared over the course of a year is low. It tracks dollars. It fields sense.
The fact that the group built an empire that stood for years on a faulty premise that went unnoticed speaks volumes of how we are all prone to imperfection. How many millions of us glossed over the disclaimer, much the same way that the Beardstown Ladies glossed over their monthly valuation statements, without blinking amber. Don't tell me that we looked the other way because the Illinois club members were endearing grandmothers. We are a callous performance-based people. Until a solitary Chicago writer asked some questions, how many Wise, Fools, and everyone in-between were guilty of overlooking the obvious.
The sad twist is that the disclaimer itself proved to be false. Yet it prompted an audit that revealed that a data entry error had propped up returns like a Wonderbra on Kate Moss.
I believe that the oversight was an honest mistake. I do. I think most of us feel that way. Yet, sadly enough, I wonder if the black eye given to the individual investor over this would lighten any sooner if this had actually been a case of deliberate deception.
Because, while the Beardstown blunder does not make the ladies' advice any less sage, or their recipes any less tasty, the unfortunate incident may give many the impression that the common investor, individually or in concert, cannot keep their own books.
That is why there is probably someone at this very moment tossing her copy of Intuit's Quicken into the bonfire. Out in suburbia, a man is crossing his fingers hoping his checks don't bounce because he couldn't balance his account statement the month before. We're a sad lot of number aversives.
We live in a wonderful age of automation. There is no need to dust off the abacus or carve into papyrus. Software as simple as TMF Sargon's Portfolio Tracker is a painless way to not only keep us honest -- but to keep us informed. Who would go to a ballgame at a field without a scoreboard? Sure, it is most unFoolish to slave over every tick, but in looking at a collection of ticks over a set period of time, who wouldn't want to know the true return. The ultimate and often solitary dialer to the fiscal "How is My Driving" hotline is oneself.
This is not to belittle gray matter's significance in qualitative analysis. We must still kick the tires, often stubbing our toes in the process. The human element will always remain critical. Think hard. Plan harder.
So, while the Wise are enjoying the fact that they are not alone in market underperformance, if one can draw the lesson of personal accountability from this, God bless the same ladies that educated the masses on the opportunities within the stock market in the first place.
I do feel for Beardstown Treasurer Betty Sinnock, making the humbling media rounds with a "Kick Me" sign on her back. You think she will make an accounting error again? Not likely.
We may forgive. We probably won't forget. But investors will walk away with a greater sense of accountability, and that, again, is what is at the forefront of all things Foolish.