Sen. Mikulski's reputation as investor was restored in '03

WHEN LAST we checked in with Sen. Barbara A. Mikulski (Aug. 10, 2003, column), she had made some amazing, uncannily awful investing decisions.

Maryland's Democratic junior senator piled into technology stocks within two weeks of the peak of the tech boom in March 2000, losing thousands of dollars in the long, slow, painful bust that followed, federal filings show.


Then she chickened out and sold multiple, fairly large stock positions in October 2002. That was within five days of the stock market's lowest point in the last seven years and the start of a brave, 40 percent rally.

"Rear-view mirror investing" was how one personal-finance professional described the senator's style. In a letter to the editor, Johns Hopkins economic historian Louis Galambos noted correctly that Mikulski's record should not inspire confidence in government's ability to allocate capital and manage assets.


But 2003 was a new year, and congressional financial disclosures for the period came out last week. Did Mikulski climb back on the stock train? Did she resume betting on risky, volatile funds that try to beat the market with borrowed money? Did she fall in love with tech stocks all over again?

Let's put it this way. We're all older and wiser. The healthy but restrained rise in the markets last year gave many investors the chance to learn from mistakes and make up lost ground -- even U.S. senators!

Only two days into the year, Mikulski withdrew between $1,000 and $15,000 from a T. Rowe Price money fund yielding less than 1 percent and apparently sank the proceeds into the Franklin Mutual Discovery Fund, of which she already held shares worth about the same amount.

Nice. Mutual Discovery produced a total return of 30 percent last year and -- if she continued to hold onto it -- another 3 percent so far this year.

Now it's early April 2003. The market had tanked during the early stages of the Iraq invasion, then recovered. Perhaps anticipating a further run for stocks, Mikulski dumped her last bearish holding, the Rydex Ursa Fund, which does well when the S&P; 500 falls.

Another winner. After the senator drained the Rydex Ursa account of between $1,000 and $15,000 -- in the imprecise range furnished by the disclosure reports -- the fund plunged 22 percent by year-end.

Can she do no wrong? Should we give Mikulski a stake for Atlantic City or appoint her U.S. minister of trade, industry and five-year plans? No, but her hot hand wasn't finished.

Rose by 20%


Along with a brief and inconsequential flirtation with bonds, the senator last June added between $1,000 and $15,000 each to her holdings in T. Rowe Price's Small-Cap Value Fund and Capital Appreciation Fund.

Ka-ching. Small-Cap Value rose 20 percent by year-end and Capital Appreciation was up 15 percent. In August, she bought more Small-Cap Value -- again, between $1,000 and $15,000.

In November, she bailed out of a bond fund and a cash fund and took more stock positions: between $1,000 and $15,000 in the Dodge & Cox stock fund, and a bigger chunk, between $15,000 and $50,000, in the Royce Total Return Fund. Both have been profitable, rising by roughly a tenth since then.

Other funds that Mikulski held for all of 2003 also made money. The T. Rowe Price Real Estate fund rose 35 percent. The Dodge & Cox Balanced Fund, managing between $15,000 and $50,000 of the senator's assets, rose 24 percent.

Conservative fund pays

Even her more-conservative investment in T. Rowe Prices Spectrum Income Fund, a fund of other funds, yielded a total return of 7 percent since she bought it last summer, assuming she has held onto it.


Like last year, Mikulski's office did not respond to my request for comment or an interview.

But her portfolio -- worth $172,000 to $630,000 -- seems much improved. Except for her brief contact with the bond fund, she wasn't in and out of investments last year. She didn't try to time the market. She continued to hold conservative banking deposits (between $100,000 and $250,000) as a core position. She was no longer buying crazy, leveraged Rydex funds or narrowly focused tech funds that had already tripled in less than two years.

Maybe she watched The Wild and Wacky World of Finance, a video produced by Cerebellum Corp., a Falls Church, Va., company in which she owns stock.

Real test still to come

The real test will come the next time as stocks climb high or plunge downward. If she again loads up as shares breach the stratosphere or bails in panic as stocks fall lower, she risks repeating the past.

On the other hand, if she holds to her core plan under almost any circumstance, lightens up on stocks during euphoria and judiciously buys when everyone else is despairing, in the long run she'll do even better than her 2003 comeback.