Mutual Madness
Entry for 2017-07-02

An other-worldly line was crossed in the mid-1990s when the financial press reported that the number of mutual funds had surpassed the number of listed stocks.

A staggering thought. It's as if the number of bowling leagues exceeded the number of bowlers. I can remember when the number of radical groups exceeded the number of radicals, but that was because there were thousands of FBI undercover agents swelling their ranks until, at one point, the G-Men were reported to hold a clear-cut majority in the American Communist Party.

During the later days of the Carter Administration, I believe there were more U.S. Army battalions than there were soldiers.

You might reasonably choose to disbelieve that assertion; but remember, no one has ever seen the Second Army. A few dozen guys march past the reviewing stand and disappear around the corner, and then some more guys march past, wearing the same uniforms.

Either way, you take it on faith, and I take it on faith that the CBS radio report I heard was right, that there are now more mutual funds than stocks. I know I've been solicited by hundreds of funds, who for some reason think they can sell shares to a person at an advertising agency in Pittsburgh, where there are more agencies than advertisers.

I used to puzzle over the status of Carl Sandburg's hog, riding the one-way rails to destiny in Chicago, which is not only hog butcher to the world but also the trading pit for pork belly futures. So the hog might board the train in Omaha, having just changed owners for the first time, and pull into the stockyards a day later having gone through six more owners at six different prices on the Commodities Exchange. But no trader there could lay claim to this particular pig and then, in a fit of decency, take him home as a pet. All they owned was a certain quantity of undifferentiated pork. And now, owners of a publicly-traded company are becoming harder to trace than those of the publicly-traded pigs.

Noting that the great Warren Buffet's Berkshire-Hathaway is holding a truckload of stock in the Washington Post, the manager of the Magellan Fund might decide to buy some, too; and the Employee Pension Fund at the Post might own some Magellan as well as some Berkshire-Hathaway.

Let's say an alert financial writer for the Post -- who of course is a participant in the Pension Fund -- notices and reports on these transactions. In the interest of full disclosure, what is she supposed to disclose? That she personally owns all of the above and that all of the above own her?

If this train stops in Chicago, don't get off.