Post of the Day
April 29, 1998

From our
DDA/Foolish 4 Board


Subject: Re: Dow Div Approach too popular?
Author: Absynthe

10% of the people in the USA (using DDA) ????? More like 0.001% of the people in the USA. That would be about 3000 people. Still probably a little high, as a count of the number of people seriously running a DDA account.

I'll think even that is way too conservative. I'm waiting until the first hint of a depression in the economy hits and people start jumping with both feet into the bond market, the talking heads start saying "See? I told you the market couldn't handle the DDA, and you individual investers were Fools for thinking so" and I stop seeing commercials for Schwab and Janus once an hour on the hour.

I can't speak for other countries, but in the Good Ole You Ess of Ay, we've got too much of a compulsive consumer glitch. Most people know they don't need all the stuff that they buy, but it's a great way to keep up with the Joneses or vicariously fulfill dreams. Most people know that they should save for retirement, but they think that their 401k and their mutual funds will be sufficient. Most people know that debt is a bad thing, but most people have at least one mortgage left on their house (if not more) and at least one credit card maxed out. Most people know that new cars lose most of their investment value in their first year, but the new car market is booming faster than Satchel Paige's fastballs. And most of all, most people think that they are too busy trying to make ends meet at home to even *think* about something as treacherous as the Stock Market.

  Finally, most people don't want to take the time to understand the Stock Market, what can be understood of it. They'd prefer to think of it as a place where rich people make deals under tables to get even more rich, or where smart people runs quadratic formulas to come up with the magic equation for success. They'd rather not take responsibility for their own inevitable failures.

Besides, slow and steady is boring. We didn't invent lotteries and slot machines in the US, but we sure as all get-out perfected the hype around them. We want instant winners. We want sure money, now. We want to buy whatever the Hot Stock of the Day is, however bad of an investment it might be. K-Tel, anyone?

Finally, most people don't want to take the time to understand the Stock Market, what can be understood of it. They'd prefer to think of it as a place where rich people make deals under tables to get even more rich, or where smart people runs quadratic formulas to come up with the magic equation for success. They'd rather not take responsibility for their own inevitable failures. They'd rather take a 'sour grapes' attitude to the whole thing and leave it up to their 'investment manager' or their friend's Hot Tips... and leave themselves more time to be with their kids, or write that Great American Novel. Forget the fact that the DDA allows this type of attitude; these people have their own feelings about the market, and logic be damned.

No, I don't buy that "overused DDA" argument for a second. Most people aren't involved in the stock market these days; most of those who are involved are only taking passive responsibility for their stocks through mutual funds or the advice of the Wise; and most of those who are taking active responsibility are trying to erratically crack home-runs instead of consistently getting to first base. Wait until the first recession hits the country, and let's see how the people's attitude toward the Stock Market in general (and the DDA in particular) is affected. Right now, I think the bandwagon is strong, but not strong enough to affect the DDA.

Then again, I'm getting ready for my first DDA investment tomorrow, so maybe I'm just seeing the glass as half full. It's a really pretty glass.


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