The Week in Review -- May 21, 1999

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  5/14 Close 5/21 Close Change %Change
DJIA 10,913.03 10,829.28 -83.75 -0.77
S&P 500 1,337.80 1,330.290 -7.51 -0.56
Nasdaq 2,527.87 2,520.14 -7.73 -0.31

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A Foolish Frame of Mind
by Jerry Thomas (tmfcheeze@aol.com)

Greetings, Fools.

A Fool named Ron W. McFarland wrote a Fribble which appeared this week. In it he writes a sentence that just might be as important as any you will ever read in Fooldom. Perhaps I should be coy and refuse to tell you what that sentence is so that, if curious enough, you will be sure to click the link and read it. If it is vexing that I use such gimmickry, you will forgive me by the time you're done reading Ron's words. "Absolom's Axiom," as he calls it, is far and away more profound than anything I expect to say in these next few paragraphs.

David Gardner, Fool co-founder, has meanwhile been offering his own profundities. Back on May 11th, he spent his Rule Breaker Portfolio report discussing the psychology of investing. Specifically, he examined the unfortunate tendency of the human mind to see things that aren't really there. Habitual patterns of thought lead to habitual errors in thinking, and investors -- thinkers, all of them -- are as prone to these errors as anyone. Worse, we live in a Wise world where the institutions that have traditionally guided your investing habits have a vested interest in fostering those errors of thought. There are many who stand to profit from your mistakes, and they will do their best to keep you thinking in ways that make you poorer than you might have been, both in pocket and in spirit.

As you read David's piece, you will learn about the psychological concept of framing. Framing is a natural thing for the human mind to do: on an airplane, a mother will consider her screaming child in a frame quite apart from that held by the passenger with a migraine headache in the next row. As an investor, you might likewise consider your own returns framed in an absolute sense, or compare them to the returns of the market as a whole. The mutual fund industry will encourage you to look at those returns in the way that best suits their interests, rather than your own. Armed with these insights from David's pen, our Community of investors exploded with commentary on our Rule Breaker Portfolio message board. You, too, can click in and join that discussion.

I invite you to notice these distinctions, and also to be aware, as you are viewing the financial media, of the subtle ways in which you are being manipulated. Because as powerful as framing can be as a means of controlling your thought, reframing can be your own way of upending the old order of things, overcoming the tired mindsets that only serve those who ought to instead be serving you. Fooldom itself is founded on a reframe: If they are Wise, then we shall be Foolish. Let us exult in Folly, seeing that we live in a world where Wisdom is ridiculous. If we find it more profitable to live in a way that is opposite to the manner promulgated by those among us who claim to be experts, let us don our belled caps and Motley coats and play the Fool. It is better to be Foolish and rich than Wise and poor, especially when we are speaking of the wealth or poverty of our own minds.

Read on as David continues his series on the psychology of investing in Wednesday's Rule Breaker. You'll discover another important psychological concept, anchoring, and its impact on the way you manage your money.

Spend some time this weekend learning about how business works. Do it for yourself, not only because you stand to increase your understanding of the way of the world, but also because it is something the Wall Street establishment so rarely encourages you to do. Check out this week's Dueling Fools feature on Hasbro (AMEX: HAS), and consider if that company's position as the designated Phantom Menace toy maker might make it a good investment. Or look to Louis Corrigan's close examination of Barry Diller and his failed attempt to bring Web portal Lycos (Nasdaq: LCOS) into his USA Networks (Nasdaq: USAI) media empire.

Kindle a new interest in the way money works, and how it can work for you, and you will be rewarded in ways that have nothing to do with money. That is a paradox, I know, but it is a truth that is hard to find when so many are telling you not to think about financial things, and to abdicate your own interests to those of others. For my own part, I hope you choose to view the world through a new frame, one that empowers you, so that you discover the profound sense of personal responsibility that is the message of the Fribble by Ron McFarland mentioned in the first paragraph above. If I've made it sound too heavy, follow it with Monday's Fribble by Warren S. Levine, "Pretty Fly (For a Wise Guy)." You'll smile.

It's a shame, but I'm already out of space. Ethan Haskel's Workshop Report from last Wednesday is one of the best pieces of Fool writing this week. Go read it, and see how one old Baltimore newspaper can put history into perspective. Also, if you can stand an extra helping of Cheeze, check out my review of the new book from Bill Gates, Business @ the Speed of Thought. Enjoy this Foolish weekend, and enrich yourself.

Until next week,
Fool on!

Cheeze

Talk about Notes from a Fool on the Cheeze-O-Rama message board!


 




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