Fools in the House
The Week in Review -- October 2, 1998
by Jerry Thomas (

Greetings, Fools.

David and Tom Gardner, founders of the Fool, are young men, so if they wish to exhibit some pointless bravado now and then, they are to be excused. A case in point: They are often wont to launch their weekly Motley Fool Radio Show with the phrase, "Foolishness is in the house."

The message? We dominate. Fools Rule, Losers Drool. Look out, Wall Street, because we're here, and we ain't goin' away. Get used to it.

This week, the phrase acquired new pith and deeper profundity, because for the first time, Foolishness really was, quite literally, in the House. The United States House of Representatives, that is.

On Tuesday, intrepid Fool David Gardner crossed the Potomac, scaled the Capitol steps, and offered testimony to the House Commerce Subcommittee on Finance and Hazardous Materials. There, David delivered an indictment of the mutual fund industry, listing a litany of Wise abuses. The rap sheet is familiar to followers of the Fool: Stunning underperformance ("94%... of managed mutual funds have historically underperformed the stock market as a whole," David told Congress), confusing fee structures, lack of disclosure, and a general absence of accountability have marked the mutual fund industry for decades. Every mutual fund investor in America should read David's testimony.

David's visit to Capitol Hill set the tone for this week in Fooldom. Tuesday afternoon Tom Gardner grabbed the baton from his brother and continued to turn up the heat in his Cash-King Portfolio Report, examining the damage that mutual fund fee structures do to individual investors. Tom runs the numbers and makes clear the true cost of mutual funds in a way that the industry, without the insistence of Congress, never will.

And was Foolishness done giving the Wise their proper drubbing? No, not by a long shot.

September saw the collapse of the hilariously named Long-Term Capital Management Hedge Fund. What went wrong? Hubris, Wise hubris -- so much that one Nobel Prize laureate could not contain it all, so they brought in two. "What are some bad ideas I can come up with?" asked Dale Wettlaufer (TMF Ralegh) in Tuesday's Fool on the Hill commentary. "A thousand-year Reich might be one. Or a long-term investing strategy that is based on leverage of 25-to-1 and the premise that all risks are knowable and controllable might be another." Dale performed the post-mortem with surgical skill, and then gave the scalpel to Louis Corrigan (TMF Seymor), who continued the autopsy in Wednesday's FOTH. Meanwhile, Yi-Hsin Chang (TMF Puck) spent her time skewering Long-Term Capital's cohort, Merrill Lynch, in a Foolhardy retelling of the Little Red Riding Hood fable.

Done bashing Wisdom? Cool. Now what? Time to turn to the flip side of Fooldom, the self-empowering side, the side where you get to take charge, feel your oats, call the shots -- because as much as we enjoy our role as activists for the interests of the individual investor, the real work of Fooldom comes in bringing our resources to people everywhere, whether you are a beginner or a veteran. The new tools we have to bring people together and gather strength from one another are astonishing. Yes, you can manage your own growth without a Wise Wall Streeter skimming his cream off the top of your bucket.

Begin by reading Selena Maranjian's classic Fribble "Random Acts of Foolishness," then step over to the Fool's School and study the 13 Steps to Investing Foolishly. From there, it is but a hop over to the Fool Community, where you can register and join the thousands of Fools around the world who are sharing their knowledge, experience, camaraderie, and support. Surely it makes sense to make use of these resources, whatever your opinion of the professionals on Wall Street might be.

There were a great many other points of interest to be seen along the way -- more than I have space to discuss -- so let me give you some extra encouragement to click the Foolwatch Link below. I really think my colleagues in Fooldom outdid themselves in producing outstanding features for your use and pleasure. But here's a few that are very outstanding:

�The Relaunch of the Boring Portfolio -- Fools Dale Wettlaufer and Alex Schay (TMF Nexus6) are taking over management of this port, and Dale in Thursday's report outlines their plans for the future.

�Wednesday's Post of the Day -- Nico Detourn (TMF Nico) always wows with her deep examinations of Internet companies, and this piece from our America Online Message folder is especially penetrating.

�Thursday's Fool Portfolio Report -- Where Jeff Fischer (TMF Jeff) gives some sound advice on maintaining Foolish composure in a falling market.

Until next week,
Fool on!



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