Fool Portfolio Report
Monday, June 23, 1997
by David Gardner (MotleyFool)

ALEXANDRIA, VA, June 23, 1997-- The overall market got whacked this summery Monday, led downward most of all by its blue-chip component. The Dow Jones industrial average surrendered 192 points, while the S&P 500 lost a similar 2%+. The Nasdaq, on the other hand, lost less than one percentage point. (The Fool fell in between.) It was a "changing of the guard" day on the market.

If you've followed the movement of our American markets in 1997, you know exactly what I mean. Big stocks are outperforming little ones significantly. The S&P 500 at Friday's close was up 21%, vs. 12% for the Nasdaq and even less for the Russell 2000 (which measures smaller companies); the Russell is up 8%. Thus, days in which the S&P 500 drops more than 2% while the Nasdaq doesn't even lose one percentage point have been few and far between.

Does this mean the small stocks are finally going to catch up to their heffalumpish brethren? One day does not a trend create. But June 23rd could be the start.

Stepping away from it all, we're dealing with pretty large numbers these days, eh? I'm in an investment club in which I'm younger than most of my other club members by an average of about 30 years. Many of the gentlemen in the club have called the market "high" for years (and it just keeps getting higher and higher). More than anything, I think for them it's a consequence of seeing the Dow up near 8000, vacillating by dozens of points a day. It must all seem so inflated. And yet, these high numbers are simply the inevitable by-product of the growth of business over long passages of time. In case you haven't noticed, it's also June 23, 1997... the "highest year ever," later than it's ever been before.

There was a day and age in which a 192-point loss for the Dow would've been worrisome, even catastrophic.

"Worrisome" would've been a decade ago, with the Dow perched at 2000. Today's point loss would've represented a 10% one-day decline. Translate that percentage drop into today's totals and that spells a Dow decline of almost 800 points. Worrisome.

"Catastrophic" would've been the Dow in the mid-1950's, the "glory days" of many of the men in my investment club. At the price level then of 400, today's 192-point dip would've cut their market in half. We're talking Microsoft today suddenly opening in the mid-$60's, Coke around $35, and Iomega back down at $11 (ouch); the Dow drops a quick 3000. It may happen again in our lifetimes, the market losing half its value over a short period of time. And the guys jumping off bridges will be the people on margin, the options gamblers (call options, that is), and the momentum players who expected their stop-loss orders to fill. Fools, on the other hand, will proceed dismayed but undeterred, willing to look past the short-term setback, ready again to put a portion of their next paycheck the same place it had always gone: back into the market.

What... us worried?

We might be, if we invested day to day, hanging our financial future on tomorrow's upticks or downticks, or a short-term price target we need somebody else to hit for us. How sad that some people live this way. Listen, the first real big relevant number for investing Fools is more like 2022... as in, Anno Domini.

The Fool Portfolio had two gainers today, enroute to its 1.38% loss. In unFoolish style, we'll celebrate those two winners and ignore all the others. Thus (sound thee, trumpets!) KLA Instruments rose $5/8 into the teeth of the market decline. And of course our short sale of The Donald followed the market downward today, yielding $1/4 of its ground. Rah, rah, ssss-boom-bah. We beat the S&P 500.

Shifting gears, with some degree of self-interest I passed my eyes down the USA Today business book bestseller list released this morning. Our paperback Motley Fool Investment Guide debuted on June 1st, hitting #9 on the list a week later. This week, it's up to #7. Am I writing this to encourage you to buy the book? NO (you already have, right?). I am however encouraging you to execute the Foolish Gambit over and over and over.

What IS the Foolish Gambit? Well, you're in a book store. You go over to the Investment section, looking under "G." You find our book. It may be well displayed, facing out for all to see from the very top shelf. If that's true, God's in his heaven and all's right with the world; no need for the Gambit.

But IF IT'S ANYTHING LESS THAN THIS (book turned inward, upside down, or out of alphabetical order) -- if it's not THE MOST EVIDENT THING YOU SEE as you approach the shelf -- it's time for the Foolish Gambit. Which is simply this: Take the book in hand and reposition it in such a way that it faces prominently outward. Multiple copies mean you put a couple on the top shelf facing out, then stack the rest facing out under "G." Through widespread use of the Foolish Gambit, I figure we shall all get us past Wade Cook in a matter of a week or two, and the world should be a much better place.

"Wade Cook," you say? Two of his books (Stock Market Miracles and The Wall Street Money Machine) currently surround our book at #6 and #8 on the business bestseller list. I don't know anything about Miracles, but I expect it's probably similar in thrust to the infamous Machine. The Wall Street Money Machine purports to provide readers with the key to achieving 30% monthly returns in the stock market, which Mr. Cook apparently claims to have done himself for years. Our own Randy Befumo looked at the book last summer, pointing out that if you managed to earn those returns with $1000 over five years, you'd have turned that money into $6.9 billion. How would you do over ten years? A handy-dandy $47.1 trillion. "Producing a substantial cash flow," reads the USA Today squib about the book. I'll say!

Actually, look over the whole list and you find quite a mish-mash... a complex, almost paradoxical look at what America really reads, today. You find the expected book about the secrets of America's wealthy. Alongside of that, two deservingly successful funny books about Dilbert (including #1, The Dilbert Future). Sprinkle in four self-help books (the eternal bestselling 7 Habits and Colored Parachute books, a "network yourself to success" thingie, and hoops coach Pitino's 10-step motivational techniques). And finally, three investment books: the Fool guide and the two Cook specials.

And this is where the Gambit comes in once again. You, dear reader, are our Foolish foot soldier working to ensure that America gets educated properly about its money. Do you want your relatives and co-workers to become convinced that they can earn 30% a month via "rolling stock and dividend capture"? Or do you want them learning about index funds, about how to research a business, read financial statements, select a discount broker, put the Dow Dividend Approach into play? You are our foot soldier. If you're ready to fight for our nation's financial freedom, the Foolish Gambit awaits you each and every time you walk through a bookstore.

If you're not prepared for this responsibility, e-mail me right now and we'll send you some reinforcements.

Fool on! --- David Gardner, June 23, 1997

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Stock Change Bid ---------------- AOL - 3/4 58.75 T -1 1/8 36.13 ATCT - 5/16 4.81 CHV -1 3/4 72.75 DJT - 1/4 9.88 GM - 3/8 55.25 IOM - 3/4 21.75 KLAC + 5/8 50.50 LU -2 3/8 70.75 MMM -2 1/8 100.00 COMS -1 5/8 48.19
Day Month Year History FOOL -1.38% 5.91% 8.65% 189.96% S&P: -2.23% 3.58% 18.61% 91.67% NASDAQ: -0.88% 2.43% 11.10% 99.16% Rec'd # Security In At Now Change 5/17/95 980 Iomega Cor 2.52 21.75 763.10% 8/5/94 355 AmOnline 7.27 58.75 708.12% 8/12/96 110 Minn M&M 65.68 100.00 52.26% 10/1/96 42 LucentTech 47.62 70.75 48.58% 8/11/95 125 Chevron 50.28 72.75 44.68% 8/24/95 130 KLA Tencor 44.71 50.50 12.95% 8/12/96 280 Gen'l Moto 51.97 55.25 6.30% 8/13/96 250 3Com Corp. 46.86 48.19 2.83% 8/12/96 130 AT&T 39.58 36.13 -8.72% 4/30/97 -1170 *Trump* 8.47 9.88 -16.60% 10/22/96 600 ATC Comm. 22.94 4.81 -79.02% Rec'd # Security In At Value Change 8/5/94 355 AmOnline 2581.87 20856.25 $18274.38 5/17/95 980 Iomega Cor 2594.53 21315.00 $18720.47 8/12/96 110 Minn M&M 7224.44 11000.00 $3775.56 8/11/95 125 Chevron 6285.61 9093.75 $2808.14 10/1/96 42 LucentTech 1999.88 2971.50 $971.62 8/12/96 280 Gen'l Moto 14552.49 15470.00 $917.51 8/24/95 130 KLA Tencor 5812.49 6565.00 $752.51 8/13/96 250 3Com Corp. 11714.99 12046.88 $331.89 8/12/96 130 AT&T 5145.11 4696.25 -$448.86 4/30/97 -1170*Trump* -9908.50 -11553.75 -$1645.25 10/22/96 600 ATC Comm. 13761.50 2887.50-$10874.00 CASH $49631.21 TOTAL $144979.59