Sixty-five percent of the 3,000-plus Fools who voted in our snap poll from Friday said life is better now than it was 10 years ago when The Motley Fool got its start. That's certainly good news. We are glad to be part of the upward progress of humanity, and if we helped even in an infinitesimal way, we're happy.
At mid-day today, as many business news services claimed "U.S. stocks weakened in a technology issues sell-off," we were looking at our own technology sell-off. Back in May 1999, Dale Wettlaufer, then manager of the Boring Portfolio, made a controversial -- yet prudent -- decision to sellCisco Systems
In today's Motley Fool Take:
- Money for Nothing?
- 10 Tips for Mike Tyson
- Quote of Note
- The Death of Textiles
- Find the Best Broker
- Quick Takes: Tommy Hilfiger, Tenet Healthcare, Genzyme, U.S. factories
- And Finally
Money for Nothing?
Mutual fund fees are sweating under the spotlight lately. Michael Oxley and Richard Baker, members of the House of Representatives Financial Services Committee, have pushed for increased disclosure of how much funds charge investors. Currently, it's difficult for investors to determine how much of their capital is eaten up by administration costs, manager salaries, trading commissions, and incentives to brokers, among other costs.
Investors have one primary gauge of how much a fund will cost: the expense ratio. However, expense ratios don't tell the whole story. John Bogle, founder of the Vanguard family of mutual funds, estimates that the expense ratio might account for as little as half of the true costs of investing in a fund.
For now, though, the expense ratio is all investors have. And a recent study found that investors would collectively save $300 million if they kept their eyes on the expense ratios of just two types of funds.
Investor advocates Fund Democracy and the Consumer Federation of America found that many investors are overpaying for money market funds and index funds. With the help of information from Morningstar, the study found the following:
65 money market funds with expense ratios higher than the 0.33% charged by the Vanguard Prime Money Market Fund, the low-cost benchmark. The average expense ratio of these funds was 0.92%, going as high as 1.89%.
- 57 Standard & Poor's 500 index funds with expense ratios higher than the 0.18% charged by the Vanguard 500 Index Fund. The average expense ratio of these funds was 0.82%, going as high as 2.18%.
You should never pay more than necessary for an investment, but overpaying is especially egregious when it comes to money market and index funds. It's like paying four bucks for something at the "Everything's a Dollar" store and tipping the cashier on the way out.
The securities within these funds don't differ much from provider to provider -- after all, the S&P 500 is the same for T. Rowe Price
10 Tips for Mike Tyson
Former heavyweight boxing champ Mike Tyson can add a new adjective to his long list of descriptors: bankrupt. The unpredictable, manic-depressive, violent, wannabe child-eater jailbird filed for Chapter 11 bankruptcy protection in a Manhattan courtroom Friday.
Tyson reportedly has earned over $300 million from his in-the-ring bouts, but has paid dearly for his more frequent street brawls and misogynistic antics. Through a combination of personal extravagance and mismanagement, Iron Mike's finances have been pummeled. Given this unfortunate outcome, and because we're just such nice people, we're offering up ten tips to help Tyson mend his messy ways.
10. Offer rights to Fox for reality series about your romantic life. Potential title: "Who Wants to Marry a Convicted Sociopathic Broke Man?"
9. While saving money by not eating out too often is one of the principles of "Living Below Your Means," Evander Holyfield's ear doesn't count as a free meal. In the future, restrict the eating of ears to corn only.
8. More Zoloft, less Soho loft. Check out our Home Center for more help.
7. Sell Bengal tigers to brother-in-weirdness Michael Jackson.
6. Auction "Dates with Mike" on eBay
5. World Wrestling Entertainment
4. Publish a series of children's books. First title: Tattoo Your Head Like Mike Tyson.
3. Move to a country that allows cock fighting and jump back into the ring.
2. Fire current financial managers for blowing all your money at the track and sign up for TMF Money Advisor's independent help, advice, and analysis.
1. To cut back on judgment expenses, try beating people up in the ring for a change.
Quote of Note
"When I think of any stock holding, I ask myself if I would be happy if my financial fortunes were entirely tied to that company. I also ask if I would pull cash out of my pocket to acquire the entire company." -- Former Fool analyst Dale Wettlaufer evaluating Cisco as a holding in the Boring Portfolio in May 1999
The Death of American Textiles
By Bill Mann (TMF Otter)
A bit of my past dies this week as Pillowtex (Ticker: PWTX.PK) enters into Chapter 11 bankruptcy for the second time in as many years. A private group in line to buy most of the company's assets plans to sell them in turn to other buyers, threatening more than 7,000 jobs nationwide, including 4,800 in North Carolina alone.
Pillowtex is the successor to Cannon Mills, where my grandfather worked his entire career. The first stock that I ever owned was Cannon Mills (long since sold), and now it's gone. Pillowtex brands, including Cannon Mills and Fieldcrest, could conceivably survive, but in decidedly stripped-down form. While this is a sad circumstance, Pillowtex was neither the canary in the coalmine nor the last man standing in the American textile industry. It is but another casualty in a dying industry.
So while Chief Executive Michael Gannaway chokes hard and takes the blame for the collapse of the 116 year-old Pillowtex, his efforts to keep the company going using American manufacturing were ultimately in vain. The reality is that Pillowtex, like many of its brethren, could not earn enough to cover the expense of keeping its American mills open, for the simple reason that the price points where consumers demand their products are too low for these companies to retain their operations in the United States.
They cannot compete with foreign mills, where expenses are substantially less, and no amount of protectionist legislation can change this. The market has spoken, and it is a ruthless arbiter. So while the regional representative for UNITE is willing to blame Washington for "undercut[ting] their industry, the standards on their job, and their capacity to compete in the global market," the reality is that U.S. textile businesses have been allowed to compete and have failed miserably.
In the past few years several similar textile companies made the same walk down to bankruptcy court, Westpoint Stevens (OTC: WSPTE), Fruit of the Loom, Burlington Industries (OTC: BRLG), and Malden Mills among them. Others with substantial textile facilities in the U.S., including Cone Mills
My vote is for "never, unless." The American textile industry is in decline because it is an economically unsustainable business when dependent upon high-cost American labor. The level of demand at prices that would sustain these businesses no longer exists. Until the time that these companies make the tough decisions to transform themselves into models that are more responsive to the realities of global economics, they will largely continue to wither away, destroying invested capital as they go.
Cheap companies often have valid reasons for being so. Pillowtex's attempt to keep its manufacturing in the U.S. came at the price of every penny of shareholders' money. Companies with deep economic flaws such as these simply need to be avoided.
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Clothier Tommy Hilfiger
Biotechnology firm Genzyme
The Commerce Department announced that U.S. factory orders in June rose 1.7% to a seasonally adjusted $326 billion. Orders for both durable and non-durable goods increased, with durable goods rising by a strong 2.6%. That's the biggest jump for durable orders since July 2002.
- For updated stories throughout the day, bookmark our ever-changing News section.
- Housing Frenzy: According to Mathew Emmert, it's still nuts out there in the housing market.
- View From the Register: Selena Maranjian has some sound advice from supermarket cashiers.
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Kate Southerland, Dayana Yochim
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