Goodman is on the staff of Money magazine. He often is asked to appear a personal finance expert on radio and tv. He also conducts investment seminars for companies and employees on 401k plans and investing.

How has Money magazine changed?

Well, Money magazine has kind of ridden the whole bull market and, I think, contributed to it as well. We've gotten a lot of people in. It's really helped them realize their financial dreams in many cases. Our circulation -- when I started in the late '70s we were at about five or six hundred-thousand.

Now we're selling about two million copies a year. We're up four times. We've attracted some competitors, we were almost alone back in the late '70s as a source of financial information. Now there are radio and TV shows, newspapers have columns on these topics, there are other magazines. There's been a profusion of information for people because there's so much more interest in the topic.

So Money has kind of ridden this whole thing, but in certain ways spawned more doing the -- the same thing. A feature we have called "One Family's Finances" where we profile individual families, has become kind of a lot of people try to copy what we do all the time. Wall Street used to be just kind of its own little private club and what Money Magazine has done, and others, has brought Wall Street to Main Street and allowed the average person, the average middle class American, to get into mutual funds and stocks and low interest credit cards and get better deals on mortgages and make themselves financially aware of all these things, which before, they didn't really think they had any choices.

Are you selling pie in the sky?

Not everybody can achieve these things, but they do have dreams, and if they do things right, you really can improve your financial lot a lot. Now we've put on the cover, you know, how you can make a million dollars. Well, in fact, if you start at age 25 in a 401K, you have a company matching you and you do it for 40 years and you invest it well, you can in fact create a million-dollar portfolio. If you start later, you probably won't make it, but if you, in fact, do the things we talk about, it's not unrealistic to do that. And many, many people are now accumulating hundreds of thousands of dollars in their 401Ks because of the investing they've done. So we do have to get magazines that people are interested in buying and we do a very good job of that. We're selling two million a month.

And I don't think it's pie in the sky. I think that these are things that people can actually achieve if they understand the rules of the game. And they're trying to learn the rules of the game in many cases. A lot of people have come late to the party and it is a party. I mean there's a feeling like "Everybody's makin' all this money on Wall Street. How do I get in on the action?" And that's -- and we tell them how to do that at Money Magazine. We tell them what mutual funds are good and what aren't good and what to watch out for as well as what to buy. We have a lot of cautionary advice as well as positive advice on what to do.

And a lot of contradictory advice.

There's a lot of advice in Money Magazine, in all the magazines. Part of people's problem is there's so much advice, they don't know who to trust. Now we've been around by far the longest and so there's a certain trust level that they have with us. And, in fact, our recommendations do quite well, including our negative recommendations. We also tell people, "Don't get into the hottest fund of the moment." The funds we tend to recommend are those that have longer term track record like five- and ten-year performance instead of the loudest, latest hot fund of this month. That's a dangerous way to buy mutual funds and we tell them that all the time. So there's a lot of things people can do. I mean we've gone through many phases. In the '70s and early '80s we talked a lot about tax shelters. Those don't exist anymore. So we don't talk about tax shelters. These things do go in phases at a certain point.

What did you make of the [radio] calls you got this morning?

Well, it was interesting......clearly a lot of people are in the market very, very strongly in a lot of risky stuff. We saw they were in technology funds, some aggressive stocks, individual stocks, Intel. And when the market's falling like this, it worries them. Their expectations have been to make a lot of money and they've been making a lot of money for a long period of time. And when the market's nervous like this, particularly with the leading part of the market, which has been the technology stocks, it clearly makes people pretty nervous. We also had some people there didn't know what they were doing. They were in mutual funds, but they didn't seem to understand it too well. And doesn't matter too much when everything is goin' up, but when the market starts falling, you start learning about this. And that's in general what's been the market.

Just to give you a sense of what's been goin' on in the last few years here, 85 percent of the money now in mutual funds has come in since 1990. There's not been a 10 percent correction in the market since Saddam Hussein invaded Kuwait. So most of the money out there has never really gone through anything like a correction of any significant measure at all. So it, makes people nervous whether small investors are going to panic and flee when the market goes down seriously or not.

Now my general view is they're not going to flee as long as the alternatives are not that attractive. If you can get two-three-four percent on your CDs or money market funds, that's not that attractive an alternative compared to the potential return in stocks. Now, obviously, there's more risk in stocks, but as long as you can't get nine-ten-11 percent, as you could in the '80s on the CD or money market fund, then people are gonna be willing to sit it out. And that's been the experience. So far, during the '90s every time the market's gone down, people have seen it as a buying opportunity. So far, they've been right. The market has come back every time. So they were right not to panic when the market went do, for whatever reason. And I think a lot of people have that view that they're gonna sit it through. Back in the '80s, particularly the '87 Crash, they did panic. A lot of people did sell out the low. They felt pretty foolish about themselves later. So in that case they said, "Well, I'm not going to be foolish again. Let me ride through this thing. I've basically got good investments and long-term, I'll make money," which is the right attitude to have.

That's the attitude we've always had at the magazine. Market timers are always gonna get whip-sawed one way or the other. They're gonna buy when it's up, when they're enthusiastic, and they're gonna sell when they get depressed when it goes down. Not a good way to make money. I think people are willing to ride through these things for the long term. Now if we get a bear market, it's probably not going to be the kind of bear market we had before, which was very quick, sudden, and it's over. It's probably going to be a longer term bear market like in '73 -- 1973 and '74, it lasted a long time and stocks were down 50 and 60 percent. That is much more difficult for people to deal with in a certain way than a sharp crash kind of situation and it's over with before they even have a chance to do anything about it.

So we'll have to see if people hang in there through a long-term bear market, which is a little bit harder to deal with, but I think in the long run they will do that, as long, again, as a alternatives are not very attractive.

Why don't they just invest in conservative mutual funds? Why so aggressive?

I think people went into aggressive funds because they realize they have to catch for the investing they've not been doing. It's what I call the Catch-Up Generation. All these particularly late Baby Boomers, people in their late 40s and 50s, they've been spending their whole life. They have not been saving. And now they see their retirement not that far off, 10-15 years, maybe earlier. And so they say, "You know, I'm not going to make it in a conservative mutual fund to have the kind of capital I need to live for a long time decently. Social Security is not gonna be there for me."

And I see this in seminars all the time. People don't believe there's going to be any Social Security. There will be something called Social Security, but it's not something you're gonna want to live on. So if there's not going the have Social Security for them and they're gonna have their own 401Ks, which is very important, but that's not enough. The only way to make up for the lost time that these Baby Boomers have not been investing is to invest aggressively. And they see these terrific returns that people have earned and they assume they're gonna get the same returns. They may or may not, but they say, "Hey, I'll get 40-50 percent. That's okay." That's a dangerous way to look at it because just because it's happened the last few years doesn't mean it's always gonna happen.

I was doing a radio show in Kansas City recently and this woman had gotten into 20th Century Ultra, which is probably about the most aggressive mutual fund you can get. And it was up about 50 percent last year, something like that. So she said, "Even if I don't get 50 percent, it's okay if I get 25 percent. That's okay." I said, "Well, how about if it went down 25 percent." "No, no. Not down. I'm not greedy. I don't have to get 50 percent." Well, in these people's minds the idea of it going down 25 or 50 percent is nonexistent. So that's what worries me a little bit is that they can get too kind of carried away with the enthusiasm and not realize you can actually lose money, not that you'll make less. That's a very big difference in the way you think about investing in mutual funds.

They have high expectations?

People do have high expectations and you can see it in the kind of cash flows into mutual funds. The money is going where it's been hottest -- technology funds. They see these records, 50-60 percent in the last year or so, and they want to jump in. Many people do not get the return that they've seen because they're getting in after those returns have been earned in many cases. So you got to be careful to jump in on something that's already shot way up.

Just to give you a few examples, some mutual funds that have been very hot will open for a short period of time and get a ton of money because of the record that was in the past, not what's gonna happen in the future, necessarily. There's a fund even recently called the PBGH, Growth Fund, which has probably has one of the best records -- I think in the last year it was up about 90 percent. They just opened an emerging growth, an even more aggressive fund for one day and brought in a hundred-million dollars in one day and closed that fund. A lot of people couldn't even -- would have wanted to get into it, they couldn't even get into it. They didn't even know it was happening. That's the kind of money that's chasing the hot action right now. Now probably you'll do well long term in a fund like that, but if there's a bear market or the market gets hit, for whatever reason, short term, I'm worried that people could want to bail out of it. They shouldn't, but they might be people with these high expectations that get dashed and they freak out the moment something goes wrong.

What does Van Wagoner represent?

Somebody like Garrett van Wagoner represents the hopes and dreams of Americans. Here's a guy who's had a fantastic record investing in very aggressive stocks, but a lot of technology stocks, and he shot from nowhere and became number one. This is what can happen in the mutual fund industry, is if you create a good track record, people will find you. And with Garrett van Wagoner, he had a great record, he's continued to have a good record by being aggressive, and he's attracted all this money. That's what happens. Again, it's a little bit worrying that all the people who are in after he's up 40-50 percent may not get that kind of return long term. But they're attracted to his record and they're willing to pour money into him if he's got a good track record.

What about the idea the funds are growing at a pace they themselves can't keep up with?

It is very difficult to manage a lot of money, particularly if it comes in very quickly. And so you see in many cases, including Garrett van Wagoner, is they close their funds. If they can't deal with a amount of money they have coming into protect their existing shareholders, they will close the funds. Not too many businesses out there I know that will refuse money on which they will earn big profits, but that's what happens in the mutual fund industry. So if the fund is taking your money, that's telling you the fund manager thinks he can invest it wisely and produce the return that's going to be similar. If they close the fund, that means that he thinks he can't invest it wisely and they're almost protecting you against your own greed. They don't want to take your money and have you be disappointed. But you see funds closing all the time because they've got such a surge of cash, particularly the ones with small companies.

It's hard to invest billions of dollars in very small companies where there aren't that many shares outstanding. And you put a ton of money in very quickly and it, in itself, makes the stock go up. So particularly the small company funds tend to close faster because they don't want to buy out the entire company; they want to have a relatively small piece of that, be diversified among many different companies. If you have $2 billion, it's hard to diversify among a lot of high quality companies and not move the stock prices in the process.

That's putting a lot of faith in these managers that their greed isn't going to want to just keep taking money in.

It's true there's this feeling that these fund manager making a lot of money 'cause they are from management fees. But on the other hand, they do want to have shareholders for the long term. Now we've been through a cycle before back in 1983. We had a similar surge in technology stocks. Everybody was getting in and the people who got in at the top lost a lot of money, discouraged a lot of people from mutual funds for a long time, for particularly the technology funds.

The fund managers today don't want to have that experience again. They don't want to have people get in at the top, have the thing fall and they sell and have tremendously disappointed investors. So they're much more quick today to close mutual funds than they were in the past, where they wouldn't have done that.

Describe the horse race phenomenon.

There's a tremendous pressure on the mutual funds managers to get the top performance on a quarterly basis, certainly on an annual basis, because if they don't, they'll lose their shareholder.... What's particularly hard today is to keep up with the indexes. Many, many mutual funds managers, like 80 percent of mutual funds do not beat the Standard & Poor's 500 Index, an unmanaged straight portfolio of 500 stocks. That's even more true with the small companies, the more aggressive ones. So these fund managers who are getting in these billions of dollars are under tremendous pressure to beat these indexes. Well, if you don't beat the index consistently, it can make it kind of hard on you.

So as a result of that, in general they've been investing these huge amounts of cash in stocks quickly. Cash levels are at relatively low levels, six or seven percent, because if they don't invest it, they don't want to be sitting on the sidelines with a lot of cash at a time when the market's zooming and they're gonna miss their indexes. So that's the kind of pressure you see on these fund managers all the time, yet if they do very well, they can become very wealthy very young. And you've seen that all the time.

Garrett van Wagoner is a good example. Here's somebody who has a great track record, very smart guy. He's done very well for himself and his shareholders coming out of nowhere basically in the last two or three years. Everybody else wants to be a Garrett van Wagoner, too, and get along while things are going well. And I think things are going to go well long term because it's a self-fulfilling thing in a certain way. All the money that's coming in is creating the market going up in general, meaning more people want to get in, and so on. Now there's a certain point at which valuations just are ridiculous and it gets totally out of hand and that ultimately does come back to Earth. But right now the money that's coming in is propelling the market higher.

Just to give you some examples, so far in 1996, we've had more money come in to stock mutual funds than in any previous year in history. Well over $130 billion has come into stock mutual funds when the previous record was about $129 billion for all of 1993. And this is money that has high expectations with it that these fund managers want to put to work. So this is what's driving the market now.

Is it dangerous?

What's dangerous about it is expectations. If people come in with high expectations and are disappointed and say the market goes down, correct 10 or 20 percent, what they've never seen before and they sell, they can lose a lot of money. That's what's dangerous about it. If they stay with good quality for the long term, it's not dangerous because that is the way people are going to finance their retirements. The Baby Boom is going to be around for a long time and they're going to need a lot of capital to live off of it to have a decent lifestyle. They're not going to be bailed out by the government and Social Security. Their company pension plans in many cases are being terminated and being converted into the old defined benefit plan where the company invested it, did everything for you, into these new defined contribution plans, the 401Ks, and the 403Bs, where you have a chance to invest yourself, but if you don't, the company's not going to take care of you. So people realize that and are more and more taking the aggressive growth oriented options in their 401Ks ...That's the way they're gonna make it.

So what is the predicament the Baby Boomers are finding themselves in?

It's what we call the Sandwich Generation. They have three big needs for capital, themselves. They're gonna live a long time in retirement. In many case their parents are trying to move back with them. This is a big trend now, is parents moving back with their kids. And then their own kids and the tremendous cost of raising the kids in the first place, and then the college education, as well as all their other needs, homes and vacations and cars and everything else. So Baby Boomers have a big need for capital if they feel squeezed by their current situation. The real solution is aggressive investing, because that's the way you can get higher returns for the amount of money you can save.

So the big thing today is 401Ks and in general so called "defined contribution" plans where the company is giving you a chance to contribute in many cases matching your contribution, allowing you to invest aggressively. More and more companies are offering aggressive investment options and investors are taking then up on it. Just to give you an example, I was at a seminar recently at Toyota. Toyota used to have just two investment options, growth and basically fixed income. As of a month ago, they now have nine investment options, including aggressive investment, international investment, those kind of things where they have more options.

The first day they offered these options they had $20 million go into them. They did in one day what the human resources guy thought would take six months to do, because the Baby Boomers, the working population there, said, "The only way I'm gonna make it is by being aggressive." Now they're taking more risk, but in the long term they're right. Just having it in the fixed income option, where they're earning five or six percent, they're not going to have their money accumulate very fast. So if they've got a long-term perspective in these defined contribution plans, they will be doing the right thing. And that, in itself, is helping the market because this money is coming in not episodically, but every two weeks. Every paycheck people are having two-three-four-five hundred dollars pulled out of their paycheck automatically going into aggressive investment options.

Now the fund managers who are receiving that money know it's comin'. Every two weeks they get another few million dollars from these 401Ks. So it gives them the confidence to invest aggressively, because they know it's not hot money that's going to be here today and gone tomorrow. So that, I think, is part of what's feeding the whole aggressive investment options out there, that the people investing the money know they're gonna keep gettin' more.

What about the old safety net?

Well, the two big institutions that provided the safety net are basically trying to get out of that business. The first one's the government. Now Social Security's gonna be there, but it's not gonna to be something that people are going to be depending on as much as before. The people now receiving Social Security are getting out far more than they put into it, and they're also getting cost of living increases and Medicare and all kinds of nice benefits. And that's fine as long as the Baby Boom, who's now in its peak earning years, is pouring in something like $60 billion a year more than is being taken out in benefits. But the Baby Boom realizes that when the Baby Boom retires in 2015-2020, their kids -- there aren't going to be enough of them paying in as much so that the benefits are going to be less. So Social Security's going to be there, but not something people want to count on. The other big part of the safety net was the pension plans, so called "define benefit" plans, where the company invested for you, they put the money in there in the first place and you'd get a lifetime pension when you retired. Well, those still exist and there's about three or four trillion dollars in these pension funds, but they're not being added to the way they were before and many companies are either terminating their old pension plans or at least offering defined contribution instead of defined benefit, which is a major structural change. So that the defined benefit is not being offered in many medium- and small-sized companies today, as it has been in the past. So the two big institutions, the government and corporations that provided the safety net are providing less of a safety net and people realize it and, therefore, that's why they have to invest on their own. And they are doing it in massive numbers.

Define "defined benefit" and "defined contribution" again.

Well, pension plans have changed before, they were so called "defined benefit" plans, meaning the company invested the money. They did all the contribution. All you had to do was work there and when you retired, you'd get a certain level of pension. You had basically no responsibility for it. "Defined contribution" is really the much more prevalent today where you are given the chance to contribute. In many cases, companies will match your contribution as well, but if you don't take 'em up on it, the company has no responsibility for you. So you not only have the responsibility to sign up for it in the first place, but then where you invest your money. And more and more companies are offering different investment options. A lot of people are confused about where they should be investing -- aggressive, conservative, or something in between -- international.

So that's a big difference between the two, is the level of responsibility has been shifted from the employer to the employee in a way a lot of employees are not particularly prepared to deal with. And they have a lot of questions on how to deal with it. And that's why, for example, we at Money Magazine have started a newsletter aimed the 401K participants. And it's gone from nothing basically to over a million subscribers in the last two years. And it's helping people to figure out how to invest in these 401Ks. There's a whole bunch of consultants that have popped up to help people invest their 401K money because they don't feel -- see, the companies don't feel they're in a position to give real advice on this, as to where people should be investing, because they don't -- if something goes wrong, they don't want to be blamed. "You said I should be investing in that aggressive fund." So they can kind of objectively give them information, say, "Here's how these funds have performed historically, but you, employee, have to decide." That's very different from the old traditional pension plans where the companies made all that decisions on where it was being -- to be invested.

Isn't this overwhelming for most people?

People are definitely confused and want information, and there's a lot of people out there willing to provide them information, for good or ill, that'll help them or hurt them with these 401Ks. In many cases companies are offering too many options. I did a seminar at General Motors. They now have 41 options of where you can investing your money. I think that's too many. They have seven different kinds of growth funds, four different kinds of international funds, three different kinds of bond funds, and it definitely leads to paralysis and confusion on the part of many employees who are not trained on how to allocate their money among these different assets. So, on one hand, it's a scary thing, on the other hand, it's a tremendous opportunity for people to learn and take responsibility for themselves, which we've not had. We've had a kind of paternalistic society. Now less so in America than in Europe and other places that have a more socialistic view where the government's gonna take care of everything for you. But even so, the waning of the traditional defining benefit pension plan and the lessening importance of Social Security is putting responsibility in people's hands which they particularly -- some want it, but a lot of 'em are not particularly prepared for it.

This is not being taught in schools. The young people coming up are not learning about 401Ks and financial management and budgeting and car leases and mortgages and all -- this whole area of personal finance is not still being taught in schools. And so people say to me, "Well, how am I supposed to learn about all these things?" And they learn it by doing it in many cases. And in many cases they don't do much. And this is why I see a lot of Baby Boomers now who get into their late 40s who haven't really paid much attention to their personal finances and they see retirement coming and they get scared and start to do things quickly. This is what I call the Catch-Up Generation.

Is it too late?

It's not too late, because if you start investing in your mid to late 40s, invest wisely, invest aggressively, get some good quality mutual funds or stocks, you can do very well for yourself. The earlier you start, the better it is, the more compounding you have for you. What's really dangerous is for people, say, in their 60s to start investing for the first time in aggressive things, because they don't have the time to recover if something goes wrong in the meantime. We had one of those people on the radio show. Somebody called in and said they've only got five years to go before retirement and they're just starting to invest aggressively now. This makes me a little nervous because if they've based their experience on what's just happened in the last five or six years, they might be disappointed. Long-term return on stocks going back to 1926 is about nine percent per year. Now in the '90s we've had returns of 12-13-14 percent, on average, some years a lot better than that. So people do not think it can go down or you can have much lower returns. So that's what's a little bit nervous-making for me, is that people getting in kind of at the end of the game. But when they do hang in there for the long term, stocks are clearly the place you're going to get the highest long-term rate of return.

Talk about downsizing in relation to the market.

People are very contradictory position these days. On one hand, they see these big companies downsizing, AT&T laying off 30,000 works, whatever it may be. And they don't like losin' their jobs. On the other hand, the moment they announce these things, the stock prices go up dramatically and they're both employees and shareholders. So they have a split feeling about this. On one and, as employees, they don't like to get laid off or even if they remain there, the existing work is piled onto fewer people. So their work load goes up and their pressures go up. On the other hand, they're stockholders and they like to see their stock price go up.

I do a seminar with people from AT&T, for example, out in New Jersey. And here are people who are getting $300- and $400,000 severance payments. They've been there for 30 years. Well, that's nice, but they don't have their job anymore, but they do like seeing their AT&T stock going up a lot. So it's a contradiction in society, that we really haven't learning to deal with yet. People don't know if they're happy or sad when these big lay-off announcements and downsizings come. It's been the big corporations that have been doing this. In general, the medium- and smaller-sized companies are growing. That's where the growth is in the economy these days. Now everybody likes stock prices to go up, but if you lose your job as a result of it, that doesn't make people feel too good.

Tell me some stories.

I remember an engineer from AT&T... he had I think it was about a $300,000 severance package and he'd been at AT&T for 30 years. And he said, "What am I supposed to feel? On one hand, I just lost my job and my security and Ma Bell was going to protect me forever. On the other hand, I've got this big wad of money. I've never had that much money. I've never had a check for three or four hundred-thousand dollars before. How do I invest this thing? Should I keep in my AT&T stock?" So you have to counsel them to diversify. A lot of people have most of their money in one stock, their company stock. They've been there reinvesting in their company all the way along. So they have their careers on the line as well as their investment portfolio in the same company. So I tell them, "You should diversify and not have your entire career and your investments in one company."

Well, they must have an ambivalent relationship with the company.

People do have an ambivalent relationship with their company. They don't want to get laid off, but they want their stock price to go up. Now, in general, the winners today in society have been the stockholders, not the employees. Employees are not getting big wage increases. Instead, they're getting profit-sharing. They're getting stock bonuses. They're getting things that are tied to the success of the company, particularly through the stock, as opposed to wages. So, on one hand, that gives you tremendous up side if you're in a good company that's doing well. I mean you could imagine the number of millionaires that are at MicroSoft today. On the other hand, you're not getting the month-to-month, day-to-day pay increases in salary -- that's the way most people thought they could make their money before.

So there's a change in the way people are being compensated. A lot of people are willing to take risks to leave bigger companies and go the smaller companies to get stock, particularly private companies, because then if those companies go public, they can become instant millionaires in some cases billionaires, by having the value of their stock go up. A good example would be Steve Jobs, who founded Apple and then basically got thrown out of his own company at Apple, went off and founded Pixar, which does computer animation for "Toy Story", Disney movie. Well, he became a billionaire when Pixar went public. He used his own capital and so on. And all the employees, aren't that many employees at this company, became extremely wealthy as well. So people are willing to take that risk to get pieces of stock in companies that can make a lot more money than they could ever have made in their salaries.

The market's booming and corporations are laying off thousands of people and wages are stagnant ...

Well, Wall Street is really running the country today in many ways. The analysts and the fund managers who are investing all this money, shareholders, are demanding higher profits all the time. And this is a pressure that the corporate executives feel. And they see it time after time, if they don't perform, they're outta there.

Just look in the last few years. The CEO of IBM, the head of General Motors, the head of Kodak, the head of Motorola, all kinds of major companies have had their CEOs thrown out because their companies are under performing, brought in another CEO who did all kinds of things the previous CEO would not have done -- sold off divisions, laid off employees. Well, they get the message. So a lot of CEOs want to stick around and they do that before they're forced to do it by either being laid off themselves or having bad earnings.

So the pressure for all of that downsizing and keeping their profits up is coming from Wall Street in many cases. Now Wall Street's not this kind of impersonal place. It's the money that's being invested by all these individual investors through mutual funds, through 401Ks, through pension plans. So this is, again, the kind of paradox. The employees who are being downsized in another are putting the pressure for these higher profits all the time through the investments they're making.

Where were you in the '87 Crash?

I remember the Crash of '87 very well. I was working at Money Magazine, and I'm the one in my office who has the stock market being updated on my computer all the time. So I had lots of people looking and seeing how it was doing all the time. I remember going out at lunch time to the local Fidelity office and seeing a huge crowd gathered around watching the ticker-tape in shock that the market could fall a hundred points, and then 200, and then 300, -- and there was no breaks on this thing. And it really scared a lot of people. But the people who really got hurt are the ones who sold after that. Almost no individual investor sold on the day of the crash. They found out about it later. There, in fact, were net redemptions in mutual funds for a year after the crash. It took a while for it to sink it. That was the worst possible time to be selling your stocks and mutual funds because prices were low.

But I remember the media was doing things on the people selling apples and they had pictures of the Depression and "This is the end of" -- it scared a lot of people. And so they learned a lesson from that. They've taken to heart in the '90s that you don't sell when it's down. You sell when it's up and when it's down, you buy more. But at that time it was a very scary time. And the other thing is people had an alternative. People forget that during those times you could get 10 percent on a bond or a money market fund. They had a good alternative to go to. Today they don't. If the stock market goes down and you go to a three or four percent money market fund. So it's not as attractive place to go as it was during the crash.

So this is what we got?

If you're going to increase your assets in the long run, the stock market is the way most people are gonna do it, either directly or through mutual funds or 401Ks. And in the long run that has been what has worked. Bonds are fixing you at the part rate of interest. That's a relatively low rate of interest, certainly below the double digits that we had in the '80s. And stocks, as volatile as they may be, are the place that people can make money significantly for themselves in the long run. If you look at the way people have made money in this country, it's basically been two ways, real estate and the stock market. Now real estate is not the way people are gonna make money as much in the future as it has been in the past. The demographics are not as favorable for real estate. You don't have the Baby Boom moving in, buying all these places. Many communities are over-built. The tax advantages of real estate are not what they used to be. So if you have real estate, the stock market's where most people are going to invest most of their money, and wisely so, I think, for the long term.

How has the fund industry responded to all these lay-offs and packages?

Well, the mutual fund industry goes for where the money is. And the severance market is probably one of the biggest markets out there. Here are people who've been working at these companies for 20-30 years all of a sudden getting a payment of $200,000, $400,000, $600,000, which they've never really invested before. So the mutual fund industry sees that as something that they can really help people out with. And they're going after it. They're doing seminars. They have advertising campaigns.

One of the big reasons that mutual funds like the 401K business is that when people leave a company, either voluntarily or involuntarily, they get a big amount of money that they want to keep within that company. So if your 401K has been with Fidelity or Dreyfus or Scutter or Kemper, or whoever it may be, and you've had a good experience in the last ten years, chances are you'll keep it with Fidelity or Scutter or Kemper. That's why the 401K market is so attractive to people, because this is the biggest pile of money people are ever gonna see, bigger than the value of their home in many cases. And particularly Baby Boomers, who are starting younger today, when you reach retirement in the mid-2000s, their nest eggs are going to be worth hundreds of thousands, if not millions, of dollars. And the mutual funds, this is the logical place for them to be wanting to get a piece of that pie. Remember, their earning management fees on all this money. They're charging roughly one percent per year to manage the money. So you get one percent of $500,000, that's a good piece of the change for the mutual funds. It's a good market for them to go after.

What about when the Boomers retire and pull their money out of the market?

People often ask, "When the Baby Boom retires, are they all going to sell their mutual funds on the same day and the market's gonna crash?" I do not think that's gonna happen. First reason is the alternatives are not going to be very attractive. If you have a long-term disinflationary economy, as I think we do, and the alternatives to the stock market are going to be two-three-four-five percent money market funds and CDs, these Baby Boomers will have 20 or 30 years of great experience in the stock market and aren't going to want to put up with low returns on cash alternatives. And they're going to realize that you have to have your money growing for the long term. So I don't think they're going to pull out their money all at once.

It's a concern, but even in the older places, for example, right now Japan and Germany have very old populations. They have very few people were born after the war. And so now they have very elderly populations relying on the stock market in many cases. They have very, very low interest rates. In Japan, it's like half of one percent. So retirees are not relying on CDs and money market funds to live; they're retiring on stock market returns. So I think the same thing will happen here. As long as the alternatives are not attractive, Baby Boomers in retirement are going to remain invested in stocks and mutual funds.

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