Fool Portfolio Report
Thursday, March 13, 1997
by Tom Gardner
(TomGardner)
ALEXANDRIA, VA., (March 13, 1997) -- This morning, Fool Global Headquarters was paid a visit by CNN's Business News team for a story on the recent move by PC Quote Online to provide real-time quotes on their Web site. The broader angle of the report, of course, is the question of what the Internet is doing to the business traditions on Wall Street.
While Roger and Lindsay wheeled camera equipment around our conference room at Fool Global Headquarters, Kim lobbed out questions like, "Is full-service brokering in its present form threatened by the Internet?"
I couldn't and can't really speak to the specific benefits of PC Quote's decision for individual investors. The annual fee for their services on the Web starts at $750 and, of course, there is ever a good deal of debate about the merits of real-time information. Do they help or hurt the private investor? How many real-time quotes do you think Warren Buffett has stared down at from his desk in Omaha, en route to building that $17.5 billion of personal wealth in less than fifty years?
Maybe one.
But PC Quote's decision does mark a further acceleration of the information flow into the office and the home. The desktop computer is fast becoming the most powerful and most consequential information and communications device since God used a burning bush to speak to Moses a few thousand years ago.
As many of the national press organizations have shied away (or worse) from global networking and mass communication -- oft implying that the Internet is nothing more than a 1-900 Loveline or a stomping ground for underworld business -- much of the local, regional and trade media has celebrated each new link in the digital chain.
Three weeks ago, David and I spoke to a crowd of 7,500 investors at the LA Times Investor Conference. It was an awe-inspiring weekend -- and it was supremely evident to us that the LA Times wants to build a community of educated readers, wants those readers to help create their publication, and sees that possibility via the networked desktop computer.
CNN's team was alive with that spirit today, with the sort of excitement that zips through our office everyday. People are eating through new information online everyday, learning at a rate never before possible.
What Bigfootmm has written about in Fooldom for more than eighteen months is coming to pass -- people are cooperating in their search for financial truths, and they aren't just finding money along the way. Something more to do with value and wealth and spirit than cash. What MF Yorick wrote about in his recent Fribble: On Jay Gatsby, the Motley Fools, and the Woodstock Music Festival is right here, right now. The re-birth of the community via digital connections is returning us to the origins of our union.
What's going to happen to the financial-services industry? What will happen to this industry that has greatly thrived on geographical distance and the ignorance of its customers -- both of which are dissolving each day in front of us. When I close my eyes and imagine Wall Street, a hook-nosed witch cries, "I'm melting. . . aaaa. . . I'm melting!" and twists down into a pool of green moisture beneath a tall, black hat. To her left stands a young girl with an empty bucket in her hand and two shares of Intel in her back pocket, bought without commission through Intel's free, direct-stock purchase plan. What will Wall Street's foot-soldiers cry after she's disintegrated. I fully expect to hear, "All hail, Dorothy!"
This theme has often been considered in this brightly-lit space over the past two-and-a-half years. And while I don't want to beat dead an already-dead wooden horse, many of the Foolish predictions about the money world have come true. Predictions offered by our staff writers, our readers, and two brothers who get too much publicity. Let's review four of them:
I. Wall Street transformed into consumer business
In NPR interviews a year ago, we talked about a financial world in which investors will pay the same amount for the same product or services, regardless of the size of their account.
First, consider the initial public offering (IPO), a construct that allows high-net-worth and institutional investors to purchase shares in advance of the small investor. Does The Gap let its wealthy customers cut others in line? Nope.
Second, consider the exclusive meetings between public companies and Wall Street analysts. Once business as usual, they are becoming rarer with every passing quarter. Never mind that they clearly violate the Securities Exchange Act of 1934. Companies aren't stopping these out of regulatory concern -- though the National Investor Relations Institute (NIRI) believes they should be worried -- no, they're ending these exclusive gatherings because they've been receiving a lot of emails from disappointed private investors. The playing field is tilting back towards the level. Financial-services businesses are being forced out of their darkness into the scrutinizing headlights from a consumer caravan.
II. The end of commission-based brokering
Nothing need be writ by me here but for an excerpt SEC Chairman Arthur Levitt's speech at the LA Times Investor's Conference:
"How many people in the room have ever
asked their broker how he gets paid?
Commissions reward a broker for the quantity
of his transactions, not necessarily the quality.
There are other ways to do it."
III. The popularity of The Index Fund
Money Magazine recently reported that only 1 in 6 equity funds kept pace with market-average growth in 1996. The growth in index-fund investing has far outpaced that in the rest of the fund world over the past fifteen months. Prayers of The Motley Fool Investment Guide have been answered. Burton Malkiel and John Bogle have provided a great service for private investors that isn't heavily marketed. Now, as the truth outs, word-of-mouth is providing all the marketing they need.
IV. A growth in demand for engaging content
But five years ago, we lived in a money world that primarily offered gargantuan spreadsheets, Greek symbols, academic jargon, and research reports that would've dried a martini in the desert. In Fooldom, we have tried to simultaneously invert the business of Wall Street while concentrating on lively and educational stuff. If you haven't favorite-place-hearted or bookmarked the following, you should consider doing so.
Freshman Year: Bust
the Tipsters
Sophomore Year: Daily Double
Junior Year: The Evening News
Senior Year: Foolish Workshop
I've tried to arrange them above to suit your level as an investor, though all four are designed for every audience. If you have a friend who is online and hasn't much considered investing, just drop them a link to Bust the Tipsters. If your third cousin is ever in search of the next great investment, throw a link to The Foolish Workshop his way. The Daily Double and The Evening News, we hope, bring substantial color and utility to a financial world trying to figure how to please the consumer.
Now we haven't called everything right, you and we, Fools. At various points along the way, Dave and I have blundered as money managers -- buying ATC Communications near its high, shorting a great company named Paychex, thinking that tiny Sonic Solutions could revolutionize the music-video world, and saying on national television last spring that Iomega looked fairly-priced at $47 a share; it did, for a few minutes.
And you, also, have made mistakes, projecting things that didn't come to pass. Buying Wal-Mart in the high-$20s because it had been dominating the planet. Believing that C-Cube Microsystems had a cake-walk to the winner's circle in the world of video compression. Shorting Woolworth at $13 a share because it just had nothing. You've missed on predictions, and so have we.
But one belief held by most every one of the 525,000 households that access The Motley Fool on the Web and America Online each month that is proving true is that which holds that Wall Street is being deflated simultaneous with the pumping up of Main Street. That everyone should and will have access to the same information at the same time as everyone else. That a can of Coke shouldn't come faster or cheaper to anyone, based on their net worth. That investing is fast becoming the consumer business that, by law, it always ought to have been.
Fool on. . . and hey, join us in the Foolish city nearest you for our April Fool's Day Party! Click in and check it out.
Tom Gardner, Fool
P.S. Oh, The Fool lost less than the S&P 500 today. Click Thursday's Numbers to your right for the latest.
(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool.
TODAY'S NUMBERS
Stock Change Bid -------------------- AOL - 1/4 44.00 T - 1/8 35.75 ATCT - 1/8 7.63 CHV - 5/8 66.25 GM - 3/4 57.00 IOM - 1/8 14.63 KLAC - 1/4 39.88 LU -1 1/8 55.38 MMM -1 7/8 89.13 COMS + 5/8 35.13
Day Month Year History FOOL -0.75% 2.00% -7.24% 147.57% S&P: -1.83% -0.16% 6.59% 72.24% NASDAQ: -0.83% -1.20% 0.18% 79.58% Rec'd # Security In At Now Change 8/5/94 680 AmOnline 7.27 44.00 504.99% 5/17/95 2010 Iomega Cor 2.52 14.63 480.59% 8/12/96 110 Minn M&M 65.68 89.13 35.70% 8/11/95 125 Chevron 50.28 66.25 31.75% 10/1/96 42 LucentTech 47.62 55.38 16.29% 8/12/96 280 Gen'l Moto 51.97 57.00 9.67% 8/12/96 130 AT&T 39.58 35.75 -9.67% 8/24/95 130 KLA Instrm 44.71 39.88 -10.82% 8/13/96 250 3Com Corp. 46.86 35.13 -25.04% 10/22/96 600 ATC Comm. 22.94 7.63 -66.76% Rec'd # Security In At Value Change 8/5/94 680 AmOnline 4945.56 29920.00 $24974.44 5/17/95 2010 Iomega Cor 5063.13 29396.25 $24333.12 8/12/96 110 Minn M&M 7224.44 9803.75 $2579.31 8/11/95 125 Chevron 6285.61 8281.25 $1995.64 8/12/96 280 Gen'l Moto 14552.49 15960.00 $1407.51 10/1/96 42 LucentTech 1999.88 2325.75 $325.87 8/12/96 130 AT&T 5145.11 4647.50 -$497.61 8/24/95 130 KLA Instrm 5812.49 5183.75 -$628.74 8/13/96 250 3Com Corp. 11714.99 8781.25 -$2933.74 10/22/96 600 ATC Comm. 13761.50 4575.00 -$9186.50 CASH $4909.01 TOTAL $123783.51
