Author: Frank Murtaugh

How is investing like whipping up a batch of lasagna or removing a bunion?

It isn’t, of course, except in the inscrutable logic of The Commercial Appeal.

Every Sunday for several years, the newspaper has run a column on mutual funds by Frank A. Jones on the front of its Money & Business section. Jones is not a reporter for the CA or any news syndicate. He is a financial adviser for Memphis-based Summit Asset Management.

It’s a great gig for Jones, whose smiling, grandfatherly visage runs with the column each week. There are hundreds, perhaps thousands of financial advisers and firms in Memphis, but only Jones gets a regular column in the only Sunday newspaper in Memphis, with a circulation that dwarfs every other day of the week. It gets good display, too. By the time you debone the Sunday paper, there are four news sections. The column takes up roughly a quarter of a page of one of them. An ad that size would cost roughly $4,000 each week, based on published CA ad rates.

I know first-hand how valuable advertising space is. This newspaper depends on it. And for five years I wrote a column called Memphis Money for its sister publication, Memphis magazine. Every year at least one financial adviser would call me and suggest, subtly or otherwise, that he supplement or replace my scribbling with some professional expertise for our well-to-do audience. We always said no thanks; there are lots of things we don t know as much about as the experts but we’re reporters and we do our best and that’s how it is.

That’s generally the philosophy of the CA, too. It doesn’t let U of M football coaches write a weekly sports column or politicians write weekly political columns or corporate flacks write the business pages or broadcasters write the television column. Reporters do that. Even the Pets column is written by a reporter, not a veterinarian.

But for some reason it lumps investing in with collecting stamps and comics, cooking, home decorating, and medical advice. Eat your vegetables, exercise regularly, don t overcook pasta, be careful how you match those bold paint colors, and buy mutual funds. These are the verities of our time. Who could doubt any of them?

I have never met Frank Jones and am not suggesting he has done anything wrong in his column. You pays your money and you takes your choice. I have been a faithful reader of the column since the day it began. But there is a fundamental difference between reporters and financial advisers. The reporter’s creed is skepticism: if your mother says she loves you, check it out. The financial adviser s creed is salesmanship and belief.

Rogue companies are getting the blame for the stock market crash, but it wasn t rogue companies that drove the Dow to 12,000 three years ago. It was the investing public’s and the media’s willingness to embrace the gospel of mutual funds as if it was no more controversial or dangerous than a casserole recipe or a bunion treatment.

The gospel usually comes in a package of platitudes and “well, duh” advice. Jones’ most recent column on paying for college is typical. Plan ahead. Don’t panic. Convert stocks to cash when it comes time to pay tuition (as if bursars would take anything else).

Then the pitch comes.

“Progessively shift your allocation from equity funds to stable value assets like bond funds.” Stable? Some bond funds — and we’re not talking junk bonds — have lost 20 percent in a year. The unit asset value goes up or down with fluctuations in interest rates and, sometimes, defaults or the threat of them. A bond fund, unlike an individual bond, never matures so your gain or loss depends on when you buy and sell.

“Try to avoid selling equities at depressed prices.” Don t we wish we could. So was WorldCom depressed at $40? After all, it had been $60 a few months earlier. Or was it depressed at $20? Or at $2, where a celebrated Wall Street analyst and media star was still recommending it?

But the cornerstone of the mutual funds industry is this: Over time, stocks will outperform bonds because they always have. The favorite “leave behind” of mutual fund salesmen is a cardboard “asset calculator” that shows how investments grow over time. In the go-go Nineties, the rate table was rarely lower than 7 percent and sometimes as high as 15 percent a year! The asset calculator never showed what happens to investments when they decline 20-30 percent a year, as many leading mutual funds have for the last three years. The Nasdaq composite, once over 5000, stands at 1,200 this week. An investor who put $10,000 into the Nasdaq in 1999 would have about $2,400 today. If the index rises 7 percent a year every year from now on, the investor will break even in 2024.

Stocks did outperform bonds over the last century, but that was because of the bull market from 1982 to 1999. The comparison doesn t look so good if you pop the bubble and use as your ending year 1982, when the Dow was 777, or even 1994, when it was 3,900.

Such are the facts. I apologize for the indecency of printing them. Check the numbers and my math if you like. And remember, always consult a professional financial adviser before investing.

THE CASE FOR SO

From the St. Louis Arch to the gates of Graceland, a lot of Cardinal baseball fans must be scratching their heads these days over Memphis Redbird outfielder So Taguchi. The former Gold Glove outfielder with the Orix Blue Wave of Japan’s Pacific League was signed to a much-hyped three year contract last January that pays him $1 million a year.

With seven figures on his contract, Cardinal fans had to presume this was at least a baby-step in the same direction Seattle took when they lured all-world Ichiro Suzuki (a former teammate of Taguchi’s) to the Pacific northwest. While a million beans may be pocket change to Sammy and A-Rod, it’s not minor-league compensation.

Alas, four months into his first season in the western hemisphere, Taguchi has played all of four games for the Cardinals, with four at bats and nary a base hit. He’s been an everyday outfielder for our Redbirds, though his batting average has dipped below .250 for most of the season, he hasn’t shown much power, and hasn’t been on base enough to make his speed a real asset for Gaylen Pitts’ club. So Cardinal Nation is asking: What in the name of Sadaharu Oh did St. Louis brass see in this guy? And what about that million-dollar price tag?

First and foremost, Cardinal (and Redbird) fans need to cut the 32-year-old “rookie” some slack. The day he first put on a Memphis jersey, Taguchi had a pair of enormously high (and unfair) standards by which he’d be measured. The first is Ichiro, either the best or worst thing that has ever happened to Japanese professional baseball. In 2001, the cannon-armed speed demon became the first player in 26 years to earn both Rookie of the Year and MVP honors. To expect the same from a player whose career average over 10 years in Japan was .277 is irrational.

The second lofty standard is the Jackie Robinson effect. From Hank Greenberg, to Robinson himself, to Fernando Valenzuela, baseball fans have come to expect players in a particular cultural vanguard to exceed normal standards of achievement. As a measure of how unbalanced this perspective can be, the fact is Greenberg was not the first Jew to play major league baseball, nor Valenzuela the first Mexican. They were the first stars to carry their respective cultural flags into the national pastime, so history has placed them in the same category Robinson very much earned. Taguchi is the first Japanese player in 110 years of Cardinal baseball, which is meaningful in itself. But as with every “investment” in a professional athlete, there’s no performance guarantee.

As you’re disecting Taguchi’s disappointing offensive numbers, check the rest of the Memphis stat sheet. You’ll see players like Jon Nunnally,

Warren Morris, and Chad Meyers — each with a few big-league notches on his belt — haven’t exactly torn the cover off the ball in Pacific Coast League play. Despite his struggles, Taguchi has played a solid centerfield and, best of all, hustles out of the batter’s box regardless of what kind of contact he’s made. On top of that, he can actually be seen smiling now and then.

Which brings us to the reason So Taguchi remains worth rooting for, and remains a sound investment for the Cardinals. The easy approach for Taguchi would have been to add a clause to his contract that stipulated if he did not make the Cardinal roster by a certain date, the contract was void and he could return to Japan and pick up where he left off with the Blue Wave. (This was the clause that had Gerald Williams in and out

of Memphis quicker than spring.) Instead, Taguchi chose to fight the

good fight and try and earn a roster spot, just as countless other

ballplayers in 30 major league farm systems are doing this summer. He

asked no special favor, and has yet to display the kind of sulking all

but expected these days from players on the cusp of reaching The Show.

So Taguchi is no Ichiro. He’s certainly no Jackie Robinson. And despite

wearing number 6, he’s still not in the same baseball hemisphere as Stan

Musial. But he’s a fighter, and a noble one at that. And wearing a

baseball uniform. Perhaps a pioneer after all.

OFF TO SEE THE WIZARD

It’s been a gut-wrenching baseball season for St. Louis Cardinal fans. The passing of broadcaster Jack Buck on June 18th took the wind out of Cardinal Nation, then the tragic death of 33-year old pitcher Darryl Kile four days later brought this massive red-clad army of loyalists to its collective knees. The fact that the club has remained in contention in arguably baseball’s worst division — the NL Central — is a credit to the fortitude of the players . . . and hardly seems to matter in the larger scheme of things.

Some golden sunshine, however, should break through the clouds this

Sunday when Cardinal legend Ozzie Smith — all by himself — will

represent the 2002 class at the Baseball Hall of Fame in Cooperstown,

New York. Only the 37th player in history to be elected to the Hall in

his first year of eligibility, Ozzie’s credentials speak for themselves:

13 Gold Gloves, more than 2,400 hits, almost 600 stolen bases, a member

of four division champs, three National League champs, and the 1982

world champion Cardinals. As Whitey Herzog — his manager for eight years

in St. Louis — argued so vehemently, Ozzie saved a lot more runs than

many of his contemporary sluggers drove in. Even if his numbers didn’t

punch his ticket, Ozzie belongs in Cooperstown for his nickname alone.

You keep the Yankee Clipper, Georgia Peach, Say Hey Kid, and Splendid

Splinter. Considering what Ozzie Smith did with his wand, er, glove, no

nickname in baseball history has been more appropriate than the Wizard

of Oz.

I’m traveling to upstate New York to see Ozzie’s induction ceremony

Sunday, and I’m going with my dad. My wife and daughter will be staying

in Memphis, my mom at home in central Vermont. The person who passed

along my beloved Cardinal gene is going to accompany me to see my hero

receive baseball’s ultimate honor.

This is where it would be easy to drop some sentimental clichés about

fathers and sons and America’s great national pastime, having a catch on

Saturday afternoon, and watching Kevin Costner movies till you choke up.

But it occurred to me as I plan this trip with my dad that, aside from

our unending devotion to all things Cardinal, we have more than a few

differences.

Dad is a college professor, has made a living standing in front of

students not quite sure they want to hear what he has to say. I, on the

other hand, get anxious speaking in front of a staff meeting of, oh,

five. Dad loves to golf, maybe not quite as much as he loves to

fly-fish. I’m an atrocity on the links — I’ve never even made contact

with a driver — and I don’t so much as own a fishing rod. Dad was a

rather solid halfback for the Central High football team here in Memphis

during the late Fifties. Still not having cracked 150 pounds, I was a

mediocre shooting guard and a good-glove-no-hit outfielder for a tiny

high school in the Vermont hamlet of Northfield (where my folks still

live).

Whatever our surface differences may be, though, the values around which

my father and I shape our lives are all but identical, and that most

certainly includes our love for Cardinal baseball. And don’t doubt that

this storied franchise is a part of our DNA. On our first visit to Busch

Stadium together, we witnessed the unveiling of a statue honoring the

first great Cardinal, Rogers Hornsby. Happened to be my paternal

grandmother’s birthday. Speaking of birthdays, Dad was born in 1942, the

year Hornsby was inducted into the Hall of Fame. I was born in 1969, the

year the greatest Cardinal of them all — Stan Musial — was inducted into

the Hall. And here in 2002, as Ozzie joins the pantheon, you guessed it.

My wife is due in September.

Since Kile’s death a month ago, I’ve been somewhat of a wandering fan.

Wins haven’t felt quite as nice, losses certainly haven’t ached the way

they once did. And a part of me needs to regain the emotional volatility

passionate fans of any team come to understand and accept as an element

of unconditional loyalty. My guess is a trip to the Hall of Fame — with

my dad, no less — is going to be a major stride in that direction. After

all, we fall in love with baseball — with baseball teams — as part of

that lifelong search for heroes. How delightful that I get to see one of

my heroes crowned in his glory . . . with another hero at my side.