Friday, May 22, 1998
by Rob Landley
Austin, TX (May 22, 1998) -- Today's article is shorter than usual since many of you are probably STILL reading yesterday's American Express buy book-- err, report. Very nice job by Dale filling in for us. For me, what a reminder this is of the collection of great minds we have in Fooldom -- on the Fool staff and beyond. I personally am still re-reading and learning from the report.
By the way, after returning from Tulsa, Oklahoma, this afternoon, Tom tossed a coin in the air on the American Express (NYSE: AXP) buy. Veteran readers of the Cash-King Portfolio will remember this recent passage during our hand-wringing delayed purchase of Gap shares. We came to you for guidance on when to buy our Gap shares, and we picked up a Foolish tip. Let's turn the clock back a few weeks and look in:
And finally, a wonderful suggestion landed in the Cash-King folder from "wjp" -- a first-time poster in Fooldom, who wrote:
"I believe that you should take the emotion out of your decision about when to buy Gap or any other stock. You have five days to buy (according to your portfolio guidelines). On the first day, flip a coin. Heads, you buy; tails, don't buy. Continue to do this each day through the fourth day. If you throw four tails in a row, then you simply buy on the fifth day."
We agree with "wjp," and so, this afternoon just long of 3 p.m., Tom flipped a quarter high into the air at Fool Global HQ and the gods dropped it tails-up on the floor. Thus, our purchase of American Express must wait for the long weekend to pass. We'll flip again on Monday.
Fools, I just finished reading a great book. Andrew Feinberg's Downsize Your Debt: How to Take Control of Your Personal Finances is quite possibly the funniest book I've ever read about personal financial planning. How contrary -- personal finance with spirited humor -- too Foolish! For many, that isn't saying much, but I think it's a distinction to be proud of. If you can't engage people, you can't teach them -- it was as true in high school as it is today.
Now, the book is a touch dated in places (having been published in 1993), but on the whole it is filled with excellent advice. I can already hear some of you saying, "Oh no, he's talking about debt again. This guy always writes about debt in my Cash-King column." But, I have to give it some due -- after all, debt is nasty. It can sneak up on you, and it'll kill your investment returns faster than you can say "bear market." The benefits of having no debt, or declining low-rate debt, are central to the Cash-King philosophy.
With that in mind, here are a few of the highlights from Downsize Your Debt:
- Know Thyself: Get and view your credit report. The fee varies by state, but is generally around $8. Links to all three credit bureaus are down at the bottom of this article. Getting a look at your credit report is worth it.
- If you want long-term debt, there are many better options than credit cards. Never put charges on there that you don't have a clear plan to pay off. Credit cards should be used only for short-term lines of credit.
- Never think in terms of minimum payments. Always pay more than the minimum payment. (As we advise in Step 3 of our Fool Debt area -- Don't Pay By Their Rules!) Prepay. (Whether you agree with this or not, Feinberg makes a pretty compelling case for the mass psychological benefits of learning how to live out of debt, before learning how to use debt.)
- Getting debt consolidation loans when one hasn't addressed (and constrained) spending habits ultimately make things worse. Transferring your credit card balance into a home equity loan and then running up your cards again sounds lunatic -- but has proven more common than lunacy.
- Generally, the best interest rates are advertised the least. It's a bit like the index fund versus managed funds -- fees are held down when there isn't a huge advertising budget. So just remember (or remind your outgoing college freshman) that banks aren't blindly mailing you credit cards or loan offers that make a lot of sense for you.
Ok, there are a few tips from the book. If you know anyone in debt, I highly recommend directing them to this book for purchase or loan from the local library. It's sharp, irreverent, and could put a future Fool on the right track.
Oh... now before I send everyone out for the long weekend, here's a group shot of all four Cash-King managers, from our get-together in Alexandria, Virginia, earlier this year. From left to right, Tom Gardner, Phil Weiss, Rob Landley, and Alan Levit.
Have a great weekend,
P.S. Two main credit bureaus from which you can order your report online are:
Stock Change Bid ---------------- CHV + 3/16 80.94 KO - 5/8 78.81 GPS + 1/4 52.94 EK + 7/16 70.56 XON --- 70.56 GM +1 11/16 76.00 INTC + 3/16 74.25 MSFT - 13/16 85.56 PFE -3 9/16 105.44 TROW -1 1/16 35.06
Day Month Year History C-K -0.56% -1.83% 6.48% 6.48% S&P: -0.37% -0.12% 10.90% 10.90% NASDAQ: -0.88% -3.39% 9.20% 9.20% Cash-King Stocks Rec'd # Security In At Now Change 2/3/98 22 Pfizer 82.30 105.44 28.12% 2/27/98 27 Coca-Cola 69.11 78.81 14.04% 2/3/98 24 Microsoft 78.27 85.56 9.32% 2/6/98 56 T. Rowe Pr 33.67 35.06 4.13% 5/1/98 37 Gap Inc. 51.09 52.94 3.62% 2/13/98 22 Intel 84.67 74.25 -12.31% Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 63.15 70.56 11.74% 3/12/98 20 Exxon 64.34 70.56 9.68% 3/12/98 17 General Mo 72.41 76.00 4.96% 3/12/98 15 Chevron 83.34 80.94 -2.89% Cash-King Stocks Rec'd # Security In At Value Change 2/3/98 22 Pfizer 1810.58 2319.63 $509.05 2/27/98 27 Coca-Cola 1865.89 2127.94 $262.05 2/3/98 24 Microsoft 1878.45 2053.50 $175.05 2/6/98 56 T. Rowe Pr 1885.70 1963.50 $77.80 5/1/98 37 Gap Inc. 1890.33 1958.69 $68.36 2/13/98 22 Intel 1862.83 1633.50 -$229.33 Foolish Four Stocks Rec'd # Security In At Value Change 3/12/98 20 Eastman Ko 1262.95 1411.25 $148.30 3/12/98 20 Exxon 1286.70 1411.25 $124.55 3/12/98 17 General Mo 1230.89 1292.00 $61.11 3/12/98 15 Chevron 1250.14 1214.06 -$36.08 CASH $3910.83 TOTAL $21296.14 *The year for the S&P and Nasdaq will be as of 02/03/98