Fool Portfolio Report
Friday, August 15, 1997
by Tom Gardner (TomGardner)

ALEXANDRIA, VA (August 15, 1997) -- Do you remember last week when I confessed that I thought we'd made some mistakes in our analysis of Ride Snowboard? We stumbled upon an exciting shorter-term growth story in a booming industry -- but as the stock rose, the business weakened. I think we erred in not studying their balance sheet closely enough.

Unfortunately (for me), Fools, I'm back here again this Friday to confess to new mistakes. I almost feel like Jimmy Swaggart. Worse still, this week, all the blunders are of my own creation. I can't look to my brother, or Jeff. I can't claim the effects of mood-altering allergy medicine, lack of food or rest, or a pestering dybbuk.

In yesterday's column dedicated to getting everything in place before investing, I offered up one or two (or three) poor interpretations. Given that this is Fooldom, of course I didn't -- whoooosh! -- get flamed by readers. Instead, I got corrected by a collection of well-meaning, articulate, clever and enlightened Fools from The Bay Area to Boston.

Where did I go wrong?

The article was fine all the way down to the issue of prepayable debt as regards mortgage payments. Jim Ohlstein of the Massachusetts Medical Society ( wrote a note pleading with me to reconsider my opinion -- even Foolishly labeling my ideas on the matter "Heresy!" And Jim was right.

Homeowners with mortgage payments ringing in at, say, 7.5% per year gain tax writeoffs that bring the real rate down below 5%. Anyone with substantial yearly home payments at low rates spread out over decades would be duncical to put off investing. With kids heading toward college, with a retirement to plan for, people are better off matching regular mortgage payments with investments in top-flight companies designed around the new long-term capital gains rate. To miss out on the potential for 10-20% annual growth through select investments in common stocks in order to pre-pay your house tagged with 5% interest rates. . . is to miss out on a very good thing. Consider, instead, amortizing your large expenses at low rates over long periods of time.

Jim, thanks for setting that straight.

Beyond that, there was little complaint.

I do want to make it very clear that my comment about feigning hardship to reduce your student loans was intended as a joke. We don't have a coat of falsely-tattered motley rags for you to wear. And while I do still believe that Fools should regularly refinance their debt at lower rates -- via bank loans, less onerous credit-cards, et cetera -- no, it's not a good idea to limp into a meeting with your student-loan officer, pretending hard times.

Oh, and one final clarification, when I suggested that Fools should let other people pay for them whenever possible, I was kidding. (I am looking to have Garry Shandling drop by our offices to help me on timing and delivery in my attempts at Foolish humor.)

Living Within Your Means

There was one error of omission in last night's report, though. I failed to state the simplest of all maxims, "Live within your means." Much as we love those stories of individual investors turning thousands into millions, compounding enormous annual flows of cash -- no one ever promised that all happiness would come from it.

Naturally, a far greater sense of satisfaction in life comes simply from living within your means. Whether you have $3,500 or $312,000 saved. And that's probably the most important personal-finance principle that Hall of Portfolio's writers like me can offer. Yes, living within your means may mean putting off graduate school to work for a few years, or buying a fixer-upper home to keep mortgage payments down, or walking past the most expensive convertible on the lot. It may mean eliminating expensive items that aren't necessities and substituting for them at lower cost when possible. Ever up the ladder of saving and investing, certainly, you can extend your budgets and charitable contributions in such away that you're always living within your means.

Excuse #1: Writing on deadline after a long workday is the closest I can get to an excuse for my blunders -- but Fools, don't even let me get away with that!

The Fool Portfolio

And now to some quick coverage of The Fool Port today. Our stocks fell 1.16% versus S&P 500 declines of 2.59%. Odd as it may sound, we'll celebrate that as a win. The S&P has now fallen 5.61% this month and our account is again within striking range of the index. We trail by just over five percentage points.

KLA-Tencor was our only stock to meaningfully buck the market's downtrend. KLAC closed up $1 15/16 and now sits just a smidgen below its all-time high of $66 7/8. No news on KLAC today.

Have a wonderful weekend, Fools. Here in Alexandria, we'll be celebrating our anniversary with remote staffers in from around the country. We're expecting sunny skies for our six-hour barbecue, a lot of kids flipping around in the moonbounce, maybe an egg-toss competition, beer for the folks in jeans, juice and soda for the folks in shorts, a lot of chatter about stocks -- and probably a couple reminders for me that prepaying all mortgage debt is ludicrous.

That sounds just about perfect. Hope you have some outdoor plans as well.

Tom Gardner, Fool

Drip Portfolio -- The market and Coke.
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Stock Change Bid ---------------- AOL - 1/16 67.06 T - 13/16 38.94 ATCT + 1/16 4.63 CHV -1 3/8 77.19 DJT - 3/16 9.69 GM -1 5/16 59.69 INVX - 7/8 31.00 IOM - 1/2 22.50 KLAC +1 15/16 66.44 LU -111/16 82.56 MMM -3 3/4 91.00 COMS -1 5/8 54.13
Day Month Year History FOOL -1.16% 0.55% 16.21% 210.13% S&P: -2.59% -5.61% 21.61% 96.51% NASDAQ: -1.55% -1.99% 20.99% 116.89% Rec'd # Security In At Now Change 8/5/94 355 AmOnline 7.27 67.06 822.46% 5/17/95 980 Iomega Cor 2.52 22.50 792.86% 10/1/96 42 LucentTech 47.62 82.56 73.39% 8/11/95 125 Chevron 50.28 77.19 53.50% 8/24/95 130 KLA-Tencor 44.71 66.44 48.59% 8/12/96 110 Minn M&M 65.68 91.00 38.56% 8/13/96 250 3Com Corp. 46.86 54.13 15.50% 8/12/96 280 Gen'l Moto 51.97 59.69 14.84% 6/26/97 325 Innovex 27.71 31.00 11.87% 8/12/96 130 AT&T 39.58 38.94 -1.62% 4/30/97 -1170 *Trump* 8.47 9.69 -14.39% 10/22/96 600 ATC Comm. 22.94 4.63 -79.84% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 23807.19 $21225.32 5/17/95 980 Iomega Cor 2594.53 22050.00 $19455.47 8/11/95 125 Chevron 6285.61 9648.44 $3362.83 8/24/95 130 KLA-Tencor 5812.49 8636.88 $2824.39 8/12/96 110 Minn M&M 7224.44 10010.00 $2785.56 8/12/96 280 Gen'l Moto 14552.49 16712.50 $2160.01 8/13/96 250 3Com Corp. 11714.99 13531.25 $1816.26 10/1/96 42 LucentTech 1999.88 3467.63 $1467.75 6/26/97 325 Innovex 9005.62 10075.00 $1069.38 8/12/96 130 AT&T 5145.11 5061.88 -$83.23 4/30/97 -1170*Trump* -9908.50 -11334.38 -$1425.88 10/22/96 600 ATC Comm. 13761.50 2775.00-$10986.50 CASH $40625.59 TOTAL $155066.97