Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Subtext Detective
What are they really saying?

By David Gardner (MotleyFool)

ALEXANDRIA, VA (June 22, 1999) -- I want to take a break from the normal routine, for one night. You won't hear much in this column about how our stocks did today (poorly), Rule Breaking, or the Internet. Little of the usual stuff. I'm giving myself a Whack on the Side of the Head, as creativity consultant Roger Von Oech puts it. (Good book, by the way. I love the cards.)

I fear that I'm often trying to fly, in this column, when I should instead be exploring. So I want to spend a few minutes of your precious time tonight on a precious topic:

Subtext.

It wasn't until 1950 that the term even came into being. The concept is, of course, much older. Subtext is simply the implicit or metaphorical meaning of a phrase or text, as opposed to its literal meaning.

Put simply, it is what Sally "is really saying."

It's helpful to be able to read subtext in almost every situation in life: business, romance, family, or heck, reading a newspaper or watching the nightly news. In fact, anywhere where there is language, there is often a subtext underneath it. ("Sub" of course goes back to Latin, where sub meant under -- the "text underneath.")

Every once in a while, it's highly informative and entertaining to play Subtext Detective. For a given conversation, or meeting, or entire day, you sit there plumbing the depths of the language being shot at you, always asking yourself (consciously -- it's a discipline!), "What is Sally really saying?" A good Subtext Detective -- or, as I prefer, Subtext Dick -- can turn these subconscious indications into conscious realizations, in the same way that a sculptor can turn a lump of stone into something evocative and beautiful.

Thus, to those who can read subtext go the spoils.

Do you find some application of this to your finances? When dealing with one or another financial entity, it behooves you always to be aware of the subtext. That's where fool.com fits in. Whether you are:

...The Motley Fool exists to give you that subtext. Many of you already know some or all of this stuff, but have you thought about passing it along to a friend who's not yet Foolish? Just copy and paste the www address. (You can also use Yo!, which is a very helpful tool for those not familiar with it.)

Let's now take a brief look at the typical statements and subtexts for a number of financial entities. Why bother? Well, too many of us do not sufficiently understand who we're dealing with -- how the business ACTUALLY works -- so that we lack the context that can give us the subtext. In no single case are any of the entities below specifically or necessarily "bad"; most of the subtexts just refer to the typical situation, the system in play.

So let's snap open our box of fingerprint powder and strap on our Holmesian Subtext Dick hat. (Below the usual suspects, I present a final one you should be aware of, as well.)

The Full-Service Broker Statement: "We've done well in that one. Let's take our profits and move on." Subtext: "I get paid based on how often I can trade your account -- which is, by the way, not in your best interest."

The Mutual Fund Manager Statement: "We will give you good, safe returns." Subtext: "We will charge you fees, year in and year out, that are in no way commensurate with the actual value we are providing. Hey, don't talk to me about index funds!"

The Online Broker Statement: "We will give you convenience and cheap prices to execute your trades." Subtext: "We would really like you to trade more, and in particular, by the way... wouldn't you like to take out a margin loan?"

The [Life] Insurance [or Annuity] Salesman Statement: "We will keep you safe and secure, so stick with us." Subtext: "We get paid when we can lock you into low-return investment products, pandering to your need for safety and security ."

The Financial Web Site Statement: "We provide news, data, and portfolio quotes every day." Subtext: "We have to be relevant. Please come back and click on our ads. It's basically the only way we make money."

We could go on with this amusing and useful exercise, probably until the sun sets and comes back up again. So... why not? Do you have any similar subtexts to share, from your own experiences? It's a parlor game. Come play ball with us over at the Rule Breaker message board. In fact, I have already stuck my first additional one up over there, which you can read right here.

Signing off,

David Gardner
Subtext Dick
June 22, 1999

06/22/99 Close
Stock  Change    Bid 
------------------ 
AMGN  +  1/8     53.00
AMZN  -6        117.50
AOL   -6 3/8    109.38
ATHM  -3 5/8     54.25
CAT   -  11/16   60.19
CHV   -  9/16    90.13
DD    -2 9/16    67.63
DJT   -  1/16     4.69
EBAY  -3 7/8    148.19
GT    -  7/16    56.88
IOM   +  5/8      4.75
SBUX  -2 3/8     36.13
TDFX  -  1/8     15.63


             Day     Month  Year   History   Annualized 
      R-BREAKER  -4.18%  -6.87%  24.63% 1150.94   67.84%
        S&P:     -0.97%   2.61%   9.26%  205.68%   25.74%
        NASDAQ:  -1.90%   4.44%  17.68%  258.28%   29.90%


    Rec'd    #  Security     In At       Now      Change
   8/5/94  2200 AmOnline       0.91    109.38   11934.44%
   9/9/97  1320 Amazon.com     6.58    117.50    1685.92%
  5/17/95  1960 Iomega Cor     1.28      4.75     270.98%
  12/4/98   900 Excite@Hom    28.04     54.25      93.47%
  2/26/99   300 eBay         100.53    148.19      47.41%
  4/30/97 -1170*Trump*         8.47      4.69      44.65%
   7/2/98   470 Starbucks     27.95     36.13      29.23%
  2/23/99   300 Caterpilla    46.96     60.19      28.16%
 12/16/98   580 Amgen         42.88     53.00      23.62%
  2/23/99   290 Goodyear T    48.72     56.88      16.75%
  2/20/98   260 DuPont        58.84     67.63      14.92%
  2/23/99   180 Chevron       79.17     90.13      13.84%
   1/8/98   425 3Dfx          25.67     15.63     -39.13%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  2200 AmOnline    1999.47 240625.00  $238625.53
   9/9/97  1320 Amazon.com  8684.60 155100.00  $146415.40
  12/4/98   900 Excite@Hom 25236.13  48825.00   $23588.87
  2/26/99   300 eBay       30158.00  44456.25   $14298.25
  5/17/95  1960 Iomega Cor  2509.60   9310.00    $6800.40
 12/16/98   580 Amgen      24867.50  30740.00    $5872.50
  4/30/97 -1170*Trump*     -9908.50  -5484.38    $4424.13
  2/23/99   300 Caterpilla 14089.25  18056.25    $3967.00
   7/2/98   470 Starbucks  13138.63  16978.75    $3840.13
  2/23/99   290 Goodyear T 14127.38  16493.75    $2366.38
  2/20/98   260 DuPont     15299.43  17582.50    $2283.07
  2/23/99   180 Chevron    14250.50  16222.50    $1972.00
   1/8/98   425 3Dfx       10908.63   6640.63   -$4268.00

                              CASH   $9924.87
                             TOTAL $625471.12
 
Note: The Rule Breaker Portfolio was launched on August 5, 1994, with $50,000. Additional cash is never added, all transactions are shared and explained publicly before being made, and returns are compared daily to the S&P 500 (including dividends in the yearly, historic and annualized returns). For a history of all transactions, please click here.

</THE RULE BREAKER PORTFOLIO>

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