I feel so bad for the Beardstown Ladies. They, of course, are the 14 women in Beardstown, Ill., most of them over 70, who sold 800,000 copies of a “common sense” investment guide describing the simple genius by which they claimed to have racked up a 10-year average annual return of 23.4 percent on their stock portfolio.
It was such a nice story, these Warren Buffetts in shawls and lavender. And now those dreadful, humorless bean counters at Price Waterhouse have gone and ruined it. The huge accounting firm audited the ladies’ books and found their return was only 9.1 percent, which is considerably worse than the girls would have done by simply buying the stocks in the Dow Jones industrial average. This would have brought them 12.1 percent.
And so it turns out that instead of diligently doing their homework and being model small investors who research their stocks, these ladies might as well have bought a few good mutual funds and thrown them in a drawer. Then, they could have used all that wasted time throwing wild sherry parties, playing canasta, sewing slipcovers, even hanging out at the local gin mill.
The old darlings are apparently beside themselves with chagrin and insist they had no idea in all those 10 years they weren’t raking in the huge profits they said they were.
“The Beardstown Ladies are just really, really sorry,” said Betty Sinnock, 66, the club’s treasurer, who blamed herself for punching the wrong figures into a computer.
I believe her. And it would almost seem there was no point in exposing their harmless hobby and its overstated claims. If they thought they were making 23.4 percent, if they felt richer, more secure, smarter, more self-confident, who are we to belittle their limited accomplishment and patronize their amateurism? At least there was no dishonest big-city broker milking them with overstated claims and misleading accountings.
Of course, they did make a bundle on their book but there have been a lot richer and more repellent characters who made big money off books lately.
And at least the ladies weren’t out peddling smutty stories about how the president came to Beardstown and groped them. They weren’t secretly tape recording their friends and taking the tapes to Kenneth Starr or going on “60 Minutes” to whine about their troubles.
There is a larger lesson here. And, no, it isn’t that 14 elderly ladies in the Heartland are more likely to be soft in the head than a lot of us younger, more acute folks who can make a mess of our finances without the excuse of advanced age.
These ladies did what all small investors are advised to do - they worked at their investments and watched their stocks. And the best they could do was 9.1 percent. Meanwhile, the financial world is full of sharpies offering the hope of effortless returns like 23.4 percent. And in this bull market they are fleecing people faster than the Securities and Exchange Commission or the state agencies can police them.
Now we are told that millions of innocent, unsophisticated Americans with fewer skills and knowledge than the Beardstown Ladies should be added to the potential pool of lambs to be fleeced. I saw Sen. Pat Moynihan, D-N.Y., on the Senate floor last week extolling his plan for partially privatizing Social Security so everybody can run out and play the stock market with money they’d otherwise pay in Social Security taxes. Think of it, he said, the typical American, by investing, will be able to build up estates of $450,000, all their own money.
The senator did everything but yell, “Every man a king,” and for a minute he sounded like a West Side Huey Long.
The trouble is, many, many people won’t make $450,000 but will make bad guesses and get wiped out or be taken by investment charlatans.
There is a far greater chance this will happen than there is that Social Security will ever go bankrupt.