No Pain, Just Gain

By JOHN ROTHCHILD

A couple of years ago, word got out that Japanese investment houses were reimbursing their customers for losses in their stock market. As a veteran of losses in our stock market, it occurred to me that this was one heck of an idea that was definitely worth imitating over here. So last week I was thrilled to learn that Mellon Bank had taken a step in the right direction. It picked up the $130 million tab for some unfortunate investments its advisers made for clients in one of the bank's subsidiaries.

You may also have read that several mutual-fund companies in the U.S. reached into their own pockets to cover recent losses in their money-market funds, even though they didn't have to. They acted out of the goodness of their hearts, and also to avoid a mass exodus of dollars from their funds and into savings accounts. Wall Street is showing a lot of compassion this holiday season.

I called Mellon to get the details on its largesse. The p.r. person there, Margaret Cohen, assured me that Mellon was under no obligation to make good on any bad investments. She said the bank was happy to make a voluntary contribution to help out customers in its trust departments, where the losses happened. The idea was to continue to maintain a positive working relationship with these bigwigs. This reminded me of the millions of little wigs who have had a tough year in the stock market -- like me. A couple of my stocks have gone down, and it would cost my brokerage firm, Smith Barney, a lot less than $130 million to maintain a positive working relationship with me. My list of downers includes a muni bond fund that I bought in anticipation of low inflation and lower interest rates, a gold fund I bought in anticipation of high inflation and higher interest rates, two China funds mentioned in an earlier column, a Turkey fund I bought because international expert Barton Biggs was quoted in the press as liking Turkey (maybe he meant to visit), and a handful of issues recently favored by Fidelity's Peter Lynch.

Being the writer for Lynch's books ought to give me an advantage in such matters, but I've shown a proven talent for ignoring his many winners and attaching my money to the small number of duds. This includes Sunbelt Nursery, down about 80%; 50-Off Stores, which is more than 50 off since I bought it; and D&N Financial and Supercuts, all of which are under water.

I called Smith Barney and asked if I could get a bailout deal similar to Mellon's. Because I make my own ill-advised investment decisions without the help of my broker, who no doubt has better ideas, I figured I was a great candidate for reimbursement. At least Smith Barney couldn't be accused of paying me off to cover up my broker's mistakes. And whatever modest sum it might choose to advance me would go a long way toward cementing my future loyalty. But spokesman Bob Connor wasn't buying any of this, and Cohen at Mellon said there was no chance that Mellon Bank would pay for my mistakes in the future if I moved my account over there. Personally, I think both firms are being short-sighted, especially when you consider that banks are about to get government permission to compete with the brokerage houses. Soon there will be a fierce tug-of-war for your business and mine, and the one that gets mine will be the one that offers something extra, such as the kind of loss protection that's just been extended to the bigwigs at Mellon.