Jeff Tjornehoj on "Business for Breakfast" 1060 KRCN Tuesday, December 5, 2006 - What They're Telling You
Q: Welcome, Jeff. What's new in the funds biz these days?A: Well, since it's the end of the year, not much. But I did hear about anew feature on the SEC's Web site that's kind of fun.
Q: I didn't figure "fun" and "SEC" went in the same sentence...
A: Yes, that's generally true. However, the AP ran a story awhile backabout a new text search feature on the SEC's Web site (www.sec.gov) thatallows anyone to search for individual words within all of the 15 millionforms companies have filed over the past four years. The reporter looked atmentions of the seven virtues (faith, hope, charity, etc.) and the sevendeadly sins (envy, gluttony, lust, etc.). I looked for some other words,and if one believes what the funds industry writes to shareholders, thingsare going very well!
Q: Okay, such as...?
A: The number of times "unfortunate" and "unfortunately" were mentioned:3,376. Citations with "fortunate" or "fortunately": over 8,000--the maximum."Punish" was cited 1,000 times, while "reward" was cited over 8,000 times.Interestingly, when narrowed to only annual reports, "low" was mentioned118 times versus 343 times for "high."
Q: But haven't funds always wanted to put the fairest light on theirresults?
A: Oh yes. But now the cynics have some actual data backing their claimsthat shareholders' communications in general aren't as balanced as they'resupposed to be. What I also found funny was the number of times "scandal"was mentioned in 2006: almost 5,800 times--three times as much as in 2005.
Q: So, what should shareholders take away from this?
A: I think the numbers speak for themselves: fund managers and execs, as agroup, use words conjuring positive images of their skills. If you readtheir quarterly or annual reviews, just be aware of the spin that oftenoccurs after poor performance. The numbers that matter most, of course, areperformance numbers--no investor ever retired on nice adjectives.
Q: Should shareholders just toss these reports without reading them?
A: No. In fact, reading the reports could be a good exercise in determiningmanagers' integrity. After all, they shouldn't be afraid to tell you whatwent right and what didn't. If you can't trust them with that much, whytrust them with your money?
Q: Good point. Thanks again, Jeff.
A: Thanks for having me.
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