September 27, 1999

To find out if you are a naive or gullible investor/consumer answer the following questions. You must answer the questions based on what your actions or thoughts would truly be under the circumstances.

1. A real estate agent's number one priority is:

a. Satisfying the buyer.

b. Satisfying the seller.

c. Selling a house.

2. When you see Michael Jordan on an ad:

a. You're not too impressed because seeing Michael on an ad simply means an additional unnecessary cost is going to be added to the product.

b. Since you trust Michael's opinion you're more likely to pay attention to the ad.

c. Michael is probably an expert on the product and his opinion is very important to you.

a. You will make money over time.

b. The fund manager is one of the best stock pickers in the world.

c. The fund's return performance will at best, track a corresponding index over time.

a. Strong political leadership especially in the White House.

b. The average American citizen and the growth of capitialism throughout the world.

c. Fed policy with special consideration given to Greenspan the Fed Chairman.

a. You have $10,000 to invest and want a good investment recommendation.

b. I would never call a CFP, they are a jack of all trades and an expert at none.

c. You need advice on tax planning.

a. Prior to 1996 Schwab focused on being a discounter, not a financial adviser, even so, they still have the best brokers in the business.

b. Not only does Schwab have some of the best brokers around, but even the customers with smaller account values have access to them.

c. Even if there was a best broker it would only be for a short period of time before the best broker turned into a goat.

a. Could care less, you know the CEO is going to talk up the company no matter what.

b. Look forward to watching it because you know CNBC will challenge the CEO and make sure investors get the straight scoop.

c. Make sure your VCR is set because you know the CEO of a company is the best source of information.

a. Know if they really have superior research they have to know something that has not been made public by the company and since that's illegal, you're not interested.

b. Know, outside of opinion, you can get all the research you need free on the internet.

c. Consider maybe the broker or online trading firm has the inside track on companies and the research they're offering could be very useful to you.

For each answer give yourself a score based on the following chart. Add up all your scores to give yourself a total score.

1. a=3 b=2 c=1
2. a=1 b=2 c=3
3. a=2 b=3 c=1
4. a=3 b=1 c=2
5. a=3 b=1 c=2
6. a=2 b=3 c=1
7. a=1 b=2 c=3
8. a=2 b=1 c=3

Total score equal to or greater than 20:

I think you are a naive or gullible investor/consumer. You are just what the companies ordered. Companies love people who don't hold them to what their advertisements claim (or when it comes to politicians, you don't hold them to what they said and promised before they were elected). If you're okay with the way you are don't change, however, if you get mad at those you care about more than corporate America and politicians, you may want to change. Next time you buy something or make an investment based on what an investment professional tells you, write down your specific goals. If the product or company or advisor does not live up to what they claimed or promised hold them accountable. Sometimes this is easier said than done, but give it a try, and next time be more careful and investigative before you buy or sign something.

Total score 11-19:

You are probably aware of how companies bullshit their customers and clients, but at times, you may buy something or make an investment without doing all your homework. If your score is on the high side of this category, you may want to follow some of the recommendations in the above category, self analysis is best here.

Total score equal to or less than 10:

You are not a naive or gullible investor/consumer. You don't pay much attention to advertisements and judge companies based more on their actions than their words. When a company screws you over, you know it and try to get your problem resolved. You're not the type of person who gets screwed twice by the same company or person.

Individual question analysis:

1. The vast majority of real estate agents care about one thing and that's selling the house. This is the only way the agent makes any money. Yes, their are a very small number of real estate agents who may care more about the buyers or sellers, or about creating a network of satified buyers and sellers, but they are rare.

2. Most celebrities don't know anything about the products they endorse. One thing for sure is that celebrities add cost to the products they endorse and many times the amounts they are paid are astronomical.

3. When it comes to stock mutual funds, you are guaranteed nothing. And just because you hold a stock mutual fund for a long time doesn't mean you will make money. Before the 90s stocks were allowed to grow based on fundamentals, but now Wall Street, including mutual fund companies, are marketing stocks like cars and soda pop. As every month passes, stocks are becomming more of a fad. As far as mutual fund managers being good stock pickers is total bull, the only time a mutual fund manager makes money is when the market is going up or when the sector the mutual fund invests in is going up (Just take a stock mutual fund's graph for at least a five year period and compare it to the overall market or an index that tracks the same stocks that the mutual fund invests in. You will see a definite correlation.). Stock mutual funds own so many stocks that at best, they will only track the overall stock market or a correspnding index over time, for example, Fidelity Select energy services, will at best, track the OSX (The OSX is an index that tracks the energy services companies.).

4. The strong economic growth in the US for the past 10 years is mainly due to the the growth of capitialism throughout the world. Many countries and companies are now competing for consumer's dollar's and the US and many US companies have an extreme competative advantage. The advantages include: investment capital, stability of the nation and currency, technology, innovation, experience with capitalism, senority, just to name a few. With so many countries now competing and many of the countries competing are selling commodities: steel, lumber, gold, food products, oil, and numerous other raw materials, inflation is anything but a problem. We can only be thankful that the Federal Reserve and White House have, for the most part, kept their noses out of the US economy.

5. Financial planners are trained in investments, insurance, taxes, estate and retirement planning. To try and be an expert in all these areas is impossible even though financial planners think they can. Most likely the investments recommended by a CFP are the ones they will make the biggest commission on. It's my personal opinion that you should try and manage your own finances and when you do need help, select someone who specializes in the area you are seeking information. The person you select may still be a CFP, one who has chosen to specialize in one area though.

6. One thing that is getting very popular is for Wall Street to suggest to investors that they have sure fire ways of making you money in the stock market or at very least, sure fire ways to help you make money in the stock market if you are now more of an independent investor. These sure fire ways of making you money or helping you make money are mostly just gimmicks.

One gimmick is to offer information and research. There are a million places on the internet to get information on stocks and companies and you can get it for free. Granted, some institutions and some brokers or analysts may be privy to inside information, but that information is suppose to be illegal, and you are not suppose to be able to trade on it. As far as non-insider information goes, it's free and available on the internet in seconds, why would you want to pay for it? Also note, information and research that is opinion, that is, many on Wall Street will try to sell you information and research that is not available free on the internet and is not necessarily inside information, however, it's nothing more than an opinion and opinions on stocks are a dime a dozen, again, why would you want to pay for it? (The Street.com is a good example.)

What's this got to do with Charles Schwab? Back in the 80s Schwab had something to offer investors: Schwab offered small investors considerable savings on commissions when compared to the full-service brokers. However, in the mid-90s, Schwab was getting booted out by the online brokers offering trades for less than $20. How did Schwab compete with this? By offering, in my opinion, gimmicks: research, information, broker help, advice, faster trading, easy access to logging on, and etc. I say gimmicks because Schwab research, information, brokers, and advice is no better than anywhere else nor does Schwab offer faster trading or easier access. When the market's moving fast, Schwab is just as slow and screws up when they load new software, just as much as everyone else. All this, and Schwab has online trading commissions 50% higher than most online brokers.

Finally, every large brokerage house will at some time have a few brokers or analysts who seem to be right on the money, but just check next year, the names will be different, that is, the winning broker or analysts this year will be the goat next year. Moreover, even if there is a best broker or a best analyst or the best research, the investor who will get the 'best' services will be the brokerage house's biggest and richest clients.

7. This is the irony when it comes to the financial news. Investors watch it or read it thinking they are going to get useful information, but think about this for one minute. Who pays the reporters and writers of the financial news? It's the same companies and individuals who you are trying to get unbiased information on. And the financial news inviewing a CEO is a great example. No reporter or writer wants to piss off a potential or current advertiser such as a CEO by asking questions that may embarrass the CEO even if the questions are relevant to shareholders.

From the point of view of the CEO, no CEO is going to tell the straight forward turth about their company if he thinks the company is in trouble. Granted, the CEO may say this quarter looks a little bleak, but they will always follow that statement with, "But the long-term prospects and fundamentals of the company are good, in fact they are very good."

8. See question 6 above.