A Great And Sublime Fool

“The Lack of Money Is The Root of All Evil: Mark Twain’s Timeless Wisdom on Money & Wealth for Today’s Investor.” The title caught my eye as I was passing through the Denver airport. So, I picked up a copy. And now I will tell you how to save $22 – don’t buy the book.

Andrew Leckey, the book’s author, is a syndicated columnist and regular TV commentator. I don’t recall any of his columns. Now I know why. The man is painfully humorless. That would not be so bad, but he has attempted to team himself up with one of the most polished wits in history. Mr. Leckey’s limitations are exaggerated by the comparison. He drags along as if he were restocking shelves.

Twain, for example, makes our point – that investors get not what they expect, but what they deserve – in a different way. “Providence always makes a point to find out what you are after,” he writes, “so as to see that you don’t get it.”

Leckey, completely deaf to the idea, follows with this: “The marked differences in the returns of seemingly similar investments are a big reason why asset allocation remains crucial.”

How does asset allocation reach Twain’s point? Mightn’t Dame Providence, in her infinite wisdom, also discover what you expect from a diversified portfolio as well as a concentrated one?

The problem is that Leckey doesn’t even seem able to understand Twain’s ironic humor. Twain typically takes common platitudes and turns them inside out, reaching for a deeper truth in the entrails. But Leckey keeps his hands in his pockets… Even the book’s title Leckey takes as a statement of plain truth. Instead of treating it as an invitation for more nuanced reflection, he takes up the challenge of helping the reader improve his financial position with the dull earnestness of a scoutmaster teaching boys to make a fire.

“There is a charm about getting rich – and yachting – which is unspeakable,” wrote Twain. “Make money and the whole world will conspire to call you a gentleman.”

Again, Leckey misses the subtle self-mockery: “Following the wisdom and common sense contained in this volume,” he writes seriously, “will help you earn the money you need for a comfortable future, and ‘gentleman’ – or ‘lady’ – you will be called.”

But watch out. It’s not easy.

“October. This is one of the peculiarly dangerous months to speculate in stocks,” Twain elaborated. “The others are July, January, September, April, November, May, March, June, December, August, and February.”

Leckey: “Twain was making a timeless point,” that investing is dangerous. Not only that but he gave us “an eerily accurate prophesy. For he began the list with October, the month of two of America’s greatest stock market crashes.” Eerie.

“Twain never took himself too seriously,” Leckey notices. But the plodding scoutmaster seems unable to take himself anything but seriously. The reader, meanwhile, is so shocked and alarmed by Leckey’s inability to react to Twain’s wit that he begins to regard the author as a bit of freak – like a man who has had brain surgery and is now unable to laugh.

One can only imagine what went through Leckey’s brain-damaged cranium when he decided to use Twain as his partner. Twain was famously bad at investing. Some investors fall for gold mines. Some fall for new technology. Twain came down hard on both. So bad was his financial management that he was bankrupt by the age of 60 – despite earning a fortune from his writing. He then had to embark on an exhausting speaking tour to rebuild his fortune.

Addressing the issue, Leckey remarks that we can learn from Twain’s “common sense.” And yet, the great writer’s sense was anything but common. Twain made a point of looking beyond the common vision of things…in order to spot the paradoxes, inconsistencies and hyped up, empty cliches in the world around him.

Leckey does the opposite – he offers his band of investment scouts unexamined platitudes, useless advice and every hollow slogan Wall Street has to offer.

“Don’t take financial tips from know-nothings or crooks,” he warns.

“Whenever you fail, always get up again, and do so with honor,” he tells us.

“Beware of scams.”

“Have plenty of stable investments, but also embrace technology. It is, after all, the future.” (And don’t forget the gold mines – ed.) Recognizing that tech stocks can be dangerous, he tells you how to protect yourself:

“Carefully differentiate among companies within a hot industry or industry segment and decide how much they’re really worth.”

Leckey helpfully provides readers with a list of mutual funds that focus on the Internet sector [this book seems to have been written early last year]. Plus, he gives readers a list of some of the “best performing” tech stocks. Here, the scoutmaster seems to have given his innocents a revolver and neglected to tell them it was loaded. The list – including CMGI, Veritas, Qlogic and JDS Uniphase – was an invitation to disaster. But what the heck, technology is the future!

Twain loved new technology and lost a lot of money in it…

“Every time I hear of some new wonder,” he wrote, “I postpone my death right off.” He invested a fortune in a typesetting innovation called the Paige Compositor, for example, which never worked.

But Leckey seems able to learn neither from Twain’s words nor his example. “Technology was a risky taboo,” he writes, but “times have changed…with people of all ages choosing technology stocks for at least a part of their portfolios. You can’t get that kind of growth anywhere else.

“The best way to get started in technology,” he elaborates, “is to build a foundation of quality technology companies by buying them on any price dips. From these core holdings – that emphasize popular names such as… Cisco… Nokia… and… Intel – you can move on to developing companies that carry much greater risk and potential reward.”

Leckey’s readers, like Twain, were destined for great losses…as these Big Techs collapsed over the last 12 months.

Twain himself knew that he was a terrible investor and cautioned others not to follow his example. “To succeed in business,’ he remarked, “don’t follow my example.” But at least he was self-aware:

“Ah well,” he said, “I am a great and sublime fool.”

Leckey remarks of Twain that “he knew exactly what he was doing.” If so, he was a bigger fool than he thought. But one suspects that on this book, at least, Twain’s co-author has him beat.

Your editor, a fool in his own right…

Bill Bonner
Santa Fe, New Mexico
May 18, 2001

*** The stock market continued its winning ways on Thursday with the Dow advancing 32 points and the NASDAQ tacking on 27 points.

*** Investors seem now to think of the bear market as though it was a passing thunderstorm on an otherwise lovely day. It made a little noise, scared a few folks and then moved along… It is a nice story, if only it were believable.

*** “The largest bear market in U.S. history was punctuated by seven very significant rallies on the way to the final conclusion,” cautions contraryinvestor.com. “Are we trying to imply it’s 1929 all over again? Of course not. We are merely pointing out that short-lived rallies are part of what defines overall bear markets. And nine of the 10 top percentage up-moves in the Dow occurred during the worst bear market in financial history.”

*** The Fed has countered this bear market more aggressively than any central bank in history – with 5 rate cuts in 5 months…knocking 2.5% off the fed funds rate. MZM, a measure of cash in circulation, has jumped 26% in the last 3 months. Is it any wonder stock prices react – if only temporarily?

*** Up until now, at least, the sharp rallies have always been ‘sucker’s rallies,'” writes Fred Hickey of The High-Tech Strategist. “This rally is also a sucker’s rally…because the bear market has not eliminated the excesses that the market built up during the mania.”

*** Overcapacity, bad investments, excess inventories and debt…they must all be corrected sooner or later. As stocks move higher, the situation for investors only becomes more dangerous…

*** It is not just stocks that are rising on the Fed’s new liquidity… The metals were higher once again, with silver up $0.03 to $4.50. Gold was up $1.60 to $274. “Newmont has outperformed Cisco over the last two years,” observes grantsinvestor.com. Newmont managed a 16% gain over the period. Cisco registered a 26% loss.

*** While most tech company CEOs grouse about current conditions in the industry, IBM’s CEO Louis V. Gerstner Jr. told an investor conference last week that the fear and trembling in the technology sector is way overdone. “We should not allow this bubble-bursting to mask the long-term perspective,” he said.

*** One part quantitative analysis, 10 parts Hollywood, sums up yesterday’s Financial Times story, “Quantifying the Maria factor.” The “Maria” under examination is, of course, CNBC’s Maria Bartiromo, otherwise known as the “Money Honey.”

*** Ms. Bartiromo is all that and more, it seems. She moves markets…big time. “When Ms. Bartiromo makes a favorable comment about a company during her regular ‘Midday Call’ spot, its share price jumps an average of 43 points within a minute – 11 points in the first 15 seconds, 20 in the next 15 seconds and 12 points in the remaining 30 seconds.”

*** Clearly, this study is not a scientific quantitative analysis. (No “quant” would express results in terms of absolute points rather than percentage move). But the essential point is unmistakable. “Research” bull market style is a five-step process: 1) Sit in comfy chair; 2) Turn on TV; 3) Tune in to CNBC; 4) Listen carefully to Maria Bartiromo; 5) Buy any stock she mentions.

*** “The top 1% of taxpayers pay about one-third of all income taxes,” writes Doug Bandow of the Cato Institute. “The top 5% pay more than half. The top 10% pay nearly two-thirds. The top 25% pay more than $4 of every $5 in taxes.” This is why most people approve of government spending…they don’t have to pay for it.

*** Yesterday afternoon, my son and I drove up to Taos. The drive, up the Rio Grande valley, is stunning. It must have been even more stunning when the Conquistadores visited in the 16th century. There were no mobile homes and no junked cars to clutter the valley. Also stunning was the price of lunch – $15 for the two of us. I’m not used to such low prices. Maybe the dollar is not overvalued after all.