<FOOLISH FOUR PORTFOLIO>

Reader's comments
on "Money Market Rags"

by Ann Coleman (TMF [email protected])

RESTON, VA (July 16, 1999) -- Wow, I received a ton of e-mail (well, zillions of electrons worth, anyway) about yesterday's article on Money magazine's attack on the Foolish Four. It was an amazing collection of articulate support for taking charge of one's own investments, so today I want to share some of the comments with you.

(I am publishing these quotations anonymously since there wasn't time to get permission from the writers to use their names. Nor was there room to use all of the excellent comments I received.)

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"I don't find it surprising that a magazine which receives millions of dollars in advertising revenue from the mutual fund industry would take issue w/FF methodology. Add in the fact that Mr. Zweig makes his living by writing about and screening for purported 'superior' mutual funds, and the fact that I believe at one time (and perhaps currently) he wrote (writes) a newsletter that provides him income, and we have discovered fertile ground for cross examination for bias on his part.

"His criticism (and implicitly the magazine's because it has editorial power) wouldn't be biased, perhaps, because of the decreasing amounts of inflow into equity mutual funds while online deep discount brokerage accounts are skyrocketing? Again, it is the fund industry that supports Money, not individual stocks.

"Any marginally competent second year lawyer could make mincemeat out of Mr. Zweig based on these potential biases. But then again, what do I know, I'm just a cynical white collar prosecutor.

"P.S. My RP4 port, started on 12/15/98, is up about 40% excluding dividends. I'm sure Mr. Zweig's ports are all doing as well or better, and that the quality of his stocks are also among the bluest of the blue chips. But alas, I preach to the converted."

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"I understand the Foolish Four philosophy and subscribe to it because it makes perfect sense. Money would be out of business within months if they agreed (or admitted that it made sense, let alone that it WORKS). The more successful the strategy becomes and the more widely known, the louder and more vehement the criticism will become from those with a vested interest in investing OPM [Other People's Money -- Ed.] for them. The louder they scream 'it can't work' the more convinced they are that it does. You may measure your success (and their fear) by the amount of negative press they give you. Bask in their criticism. Welcome it. It means you're winning."

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"I've been a Fool for just over three years. Prior to Fooldom I was your typical Money reader who had mutual funds. I read every book by the Gardners & Sheard. It made so much sense it felt too good to be true. I have worked so hard for my money and I want my money to work hard for me. I started with about 30K, adding 30 a year, and in three years [the portfolio] is now valued over $290K. (12 stocks)

"There is no education system in place for our children and I can't tell you how many people I meet each day who have little knowledge of the simple steps to investing.

"There is so much opportunity, and yet most folks don't ever think about spending 20 minutes a month to learn a few new ideas that could impact their future. It hurts to see this stuff... I always try and preach some Foolish wisdom and sometimes it works. I could write a novel on what a wonderful impact the Fool has had on my life."

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"Really enjoyed your Foolish Four column today titled "Money Mag Rags." Here's some thoughts:

"1. Money magazine gives the term 'rag' a bad name. I can't recall another mass-circulated financial magazine that's so full of crap and so hot on the 'investment du jour.' Since I discovered Fooldom, I refuse to read it and others of its ilk. One has to wonder why they continue to emphasize how great mutual funds are, given their abysmal track record, and don't talk about how any small Fool can do better by employing a modicum of research and a consistent strategy. They'll be having snowball fights in Hell before I ever again take anything I read in Money seriously.

"2. One of the greatest things about being a Fool is being able to laugh at the Wise. To answer Jason Zweig's question about why anyone would use the RP method of stock picking to predict future returns, the answer is quite simple (as most Foolish things are). Because it works, you idiot, and it's not data mining. Check the facts.

"3. Let the Heathen (Wise) rage, and may the Foolish prosper. It's the dawn of a new age -- the Age of the Small Investor."

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"About four years ago I started reading the Motley Fool, and the original site made such compelling good sense that I soon took my money out of the hands of the Wise and into my own. I have prospered ever since, not wildly, but to the point where I can seriously think about early retirement (age 55 or so). Based on actual results to date, this would never have happened with the wise running the show. There are times when I disagree with some of the thoughts expressed on the site, but all that really means is that I am thinking for myself about financial issues instead of leaving it up to someone else."

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"I read the McQueen and Thorley article, and reread the answers you posted to it in May.

"The one question that McQueen and Thorley raised that I'd be interested in hearing a response on is why do you think the price of a stock has anything to do with its performance?

"The lowest priced Dow stocks may be low because of a stock split as opposed to a depressed stock. The strategy would make more sense if it was based on high yielding stocks that were off their 50 day moving average, or some other metric suggesting that they were priced lower than normal. As you guys mention in several other articles, a stock split has no impact on the performance of a stock... there are simply twice (or three or whatever) as may shares as there were before."

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I included this one because it was the closest to a negative comment that I got on the subject of the Money article. Equal time and all that. Also, included it because this writer makes an excellent point. One we have wondered about for several years, actually. Only recently have we had a database that will finally allow us to test this idea ourselves. I promise you all that research into this subject will be performed, and soon. The question will be, is there a correlation between a stock's price and its future volatility?

Monday: Back to Retirement Planning.

Fool on and prosper!

Today's Stock Lists | 1999 Dow Returns

07/16/99 Close

Stock Change Last -------------------- CAT - 9/16 58.94 JPM - 13/16 137.38 MMM + 1/8 87.94 IP +1 11/16 53.44

Day Month Year History FOOL-4 +0.35% 0.60% 26.52% 28.40% DJIA +0.21% 2.18% 22.88% 22.39% S&P 500 +0.65% 3.35% 16.00% 16.28% NASDAQ +0.88% 6.66% 30.64% 32.43% Rec'd # Security In At Now Change 12/24/98 24 Caterpillar 43.08 58.94 36.81% 12/24/98 9 JP Morgan 105.51 137.38 30.20% 12/24/98 22 Int'l Paper 43.55 53.44 22.70% 12/24/98 14 3M 73.57 87.94 19.53% Rec'd # Security In At Value Change 12/24/98 24 Caterpillar 1034.00 1414.50 $380.50 12/24/98 9 JP Morgan 949.62 1236.38 $286.76 12/24/98 22 Int'l Paper 958.12 1175.63 $217.51 12/24/98 14 3M 1030.00 1231.13 $201.13 Dividends Received $49.99 Cash $28.26 TOTAL $5135.88