Perilous Language Lessons
As "Plunging Warnings Slump Global Fears"

by David Gardner (DavidG@fool.com)

ALEXANDRIA, VA (Sept. 30, 1998) -- The Fool Portfolio got pounded along with the rest of the market Wednesday, as we watched our account deflate 3.57%, while the S&P 500 dropped 3.05% and the Nasdaq lost 2.32%. The month still closed out a strong one, though no record was set.

For September, the Fool Port gained 23.89%, about doubling the Nasdaq (up 12.98%) and about quadrupling the S&P 500 (up 6.21%). Hey, 23.89% ain't bad, but what was the greatest FoolPort month ever? April 1996, up 32% as Iomega went through the roof following a Fortune cover story and a massive short squeeze. No Fortune covers this month, and maybe-maybe-not on the short squeeze. (Whoever knows?) Anyway, the market wilted the last few days of September, taking away our shot at the Fool record.

I had the opportunity to testify before Congress yesterday on the subject of mutual fund fees. If you're a regular Fool, you've probably seen the feature on the testimony, but if you're invested in mutual funds and only click in from time to time, you might be interested in reading it. So click here. For my own personal impressions of the day, I posted late last night to our new Foolish Features message board, and you can read my take on things right there.

The chairman of that Congressional subcommittee is Mike Oxley from Ohio, who in the past proposed decimal pricing for the markets. That is very Foolish by the way, very Foolish. It's something we harp on, from time to time, so let me go back to the Foolish Harp for a minute and strum away some more:

I got a note from my neighbor Philip Marston recently, who had just returned from France and wrote that upon his return, he quoted Bay Networks and got a price that ended with the following fraction: 87/256. Philip wrote, "That's eighty-seven two-hundred and fifty-sixths for those near-sighted souls trying to read the number in a newspaper. Now I ask you: Would even the Sumerians, who used Base 12 numbers, have quoted stocks in ancient Babylon in 256ths? Let's see, that's 21 and one-quarter twelfths, right? No wonder Gilgamesh wandered off on some wild quest! Anything to avoid talking in two-hundred and fifty-sixths! Talk about a poster child for switching to decimals."

Talk about one, indeed. This change will be most welcome, finally giving investors the same dollars and cents that they're used to seeing on grocery store price tags. It'll make everyone's life easier, and probably narrow trading spreads further.

(Harp cast aside.)

The market did indeed have a bad day today, and few stocks gained ground. In our portfolio, the only winner we had was Donald J. Trump, which recovered an eighth to $3 5/8. Given that we are short DJT, that means we were "ohfer" today. Ohfer -- a baseball term meaning we failed to reach base in all plate appearances. Hmph. So what happened? I mean, why the loss today, why the continued volatility? Well, CNN puts it this way on its site:

"Raging disappointment with a modest Federal Reserve interest rate cut, rising fears that a global economic slump will worsen, a series of corporate profit warnings and plunging markets overseas caused deep losses for U.S. stock markets Wednesday."

It just sounds catastrophic, doesn't it?

The active words there: "raging," "disappointment," "fears," "global," "slump," "worsen," "warnings," "plunging." All in one sentence, and I didn't even include "deep losses"! Somebody enjoys writing scary headlines down there in Atlanta. Hey, YOU try to write a single sentence that contains all eight of those words. Let me give it a shot (allow me to change the case of a word or two):

The raging river slumped, plunging over the edge like a worsening barometer giving off warnings, and landing in the pool below, its global blue colors roiled to a foamy white disappointment, its fears --

Nah, I can't finish it. That's not a sentence; that's simply a horrible attempt at English. Listen, it's about as difficult to include those eight words in a single sentence as it is to explain why the market does what it does on any given day. For our part, we don't spend lots of time agonizing about it. If and when the market rises again tomorrow, you'll hear it said that corporate profits are coming in stronger than estimates, there's "increasing confidence" that a global slump will be averted, etc. Are you tired of this stuff yet?

Hey, those who are Foolishly investing regular amounts of their savings into the market (historic annualized return: 11%) treat today like any other -- minor sense of disappointment at the decline in one's account value, minor happiness knowing that any money invested today or tomorrow in a 401(k) or DRiP will be done at a discount. By the way, the Drip Portfolio is presently up 12.04% on the year, well ahead of the S&P 500's 4.80%. This is the real-money portfolio started on July 28, 1997 whose 20-year goal is simple: "[Build] an initial base of $500 and an additional $100 invested per month into $150,000." Its modus operandi simulates the actions of exactly whom I described above: "Those who are Foolishly investing regular amounts of their savings into the market."

Speaking of horrible English, I was recently writing a few sentences in our next book (Rule Breakers, Rule Makers -- as an aside, this is the book that was written to answer for many why we buy stocks like Amazon.com in this portfolio, stocks which seems to Break all of our Rules... and which, interestingly enough, often wind up our best investments). Anyway -- again, speaking of horrible English, these sentences got an interesting reaction from Microsoft Word. Here they are:

Indeed, without its bidding rules, Bridge could not be played effectively at all. As the old saying goes, exceptions prove the rules. And Rule Breakers are the exception, very rare birds swooping and diving out there over the investment landscape.

Microsoft suggested the following substitutions for the two words in bold face above: "it's" and "they're," respectively. Try it yourself! Paste those words into Word, and see what the grammar checker thinks....

... it's just another reminder, brought to you by The Motley Fool, to do the bidding of messieurs Crosby, Stills, Nash & Young: "Teach Your Children [Well]." (Remember that tune?) I love computers and I love software, but I don't think much of grammar checkers. Man, oh man, no sirree.

There's an investment analogy in there, by the way: Know what you're doing with your money. Relying on someone else to tell you what to do is going to be to your long-term detriment, more often than not. A caller to our Motley Fool Radio Show last weekend mentioned how he called his broker [from a well-known firm] about 30 years ago and asked the guy to put him into McDonald's. The grammar checker -- er, the fellow -- convinced him that there was a better option, something called "Mall Developments" (that was very close to the name, something like it). Mall Developments promptly went bankrupt a few years thereafter, and as for McDonald's, it hasn't done too badly, eh? To see the 15-year stock chart, versus the S&P 500, click here. (You can get charts like these anytime you like via http://quote.fool.com -- for intervals of anywhere from 15 years to 5 minutes -- I love these things.)

Know your grammar and know your money. That's not everything in life, not by a long shot, but you'll get much further along if you do.

Fool on!

-- David Gardner, September 30, 1998

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09/30/98 Close

Stock Change Bid ---------------- AMZN -1 1/2 111.63 AOL -5 5/8 111.38 T -1 7/16 58.44 DJT + 1/8 3.63 DD -2 3/8 57.13 XON - 5/8 70.63 INVX - 1/2 12.13 IP -2 3/8 46.63 IOM - 1/4 3.75 KLAC -1 3/4 24.88 LU -5 69.25 SBUX -1 5/8 36.19 COMS -1 1/2 30.06 TDFX - 3/4 11.25
Day Month Year History Annualized FOOL -3.57% 23.89% 42.62% 378.64% 45.79% S&P: -3.05% 6.21% 4.80% 121.86% 21.15% NASDAQ: -2.32% 12.98% 7.86% 135.20% 22.87% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 111.38 2962.75% 9/9/97 580 Amazon.com 19.11 111.63 484.10% 5/17/95 1960 Iomega Cor 1.28 3.75 192.88% 10/1/96 84 LucentTech 23.81 69.25 190.87% 4/30/97 -1170*Trump* 8.47 3.63 57.20% 8/12/96 130 AT&T 39.58 58.44 47.65% 2/20/98 200 Exxon 64.09 70.63 10.20% 2/20/98 270 Int'l Pape 47.69 46.63 -2.24% 2/20/98 215 DuPont 59.83 57.13 -4.53% 7/2/98 235 Starbucks 55.91 36.19 -35.27% 8/13/96 250 3Com Corp. 46.86 30.06 -35.85% 8/24/95 130 KLA-Tencor 44.71 24.88 -44.37% 1/8/98 425 3Dfx 25.67 11.25 -56.17% 6/26/97 325 Innovex 27.71 12.13 -56.24% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 79076.25 $76494.38 9/9/97 580 Amazon.com 11084.24 64742.50 $53658.26 4/30/97 -1170*Trump* -9908.50 -4241.25 $5667.25 5/17/95 1960 Iomega Cor 2509.60 7350.00 $4840.40 10/1/96 84 LucentTech 1999.88 5817.00 $3817.12 8/12/96 130 AT&T 5145.11 7596.88 $2451.77 2/20/98 200 Exxon 12818.00 14125.00 $1307.00 2/20/98 270 Int'l Pape 12876.75 12588.75 -$288.00 2/20/98 215 DuPont 12864.25 12281.88 -$582.38 8/24/95 130 KLA-Tencor 5812.49 3233.75 -$2578.74 8/13/96 250 3Com Corp. 11715.99 7515.63 -$4200.37 7/2/98 235 Starbucks 13138.63 8504.06 -$4634.56 6/26/97 325 Innovex 9005.62 3940.63 -$5065.00 1/8/98 425 3Dfx 10908.63 4781.25 -$6127.38 CASH $12005.75 TOTAL $239318.06

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