Apr 12, 2017

John Bogle on mentoring

Mentoring, in my mind, is less about helping someone fill out a checklist of accomplishments, and much more about passing along the immeasurable qualities one needs to be successful in their field --character, professionalism, honesty, intellectual curiosity, even humor. If you possess sufficient amounts of those characteristics, you're likely to be successful in whatever field you work in.

~ John Bogle

Ernest Hemingway on bankruptcy

"How did you go bankrupt?” Bill asked. "Two ways,” Mike said. “Gradually and then suddenly.”

~ Ernest Hemingway, The Sun Also Rises

Apr 11, 2017

John Bogle sees investment management as a zero sum game

In the debate about the fiduciary rule, one basic fact has been largely ignored. Investment wealth is created by our public corporations and reflected in stock prices. Stock market returns are then allocated between the financial industry (Wall Street) and shareholders (Main Street). So when the consulting firm A.T. Kearney projected that the fiduciary rule would result in as much as $20 billion in lost revenue for the industry by 2020, it meant that net investment returns for investors would increase by $20 billion.

By any definition, that’s a social good.

~ John Bogle, "Putting Clients Second," The New York Times, February 9, 2017

Kevin Duffy on the Fiduciary Rule

If we’re going to pass a law against conflicts of interest, shouldn’t there be a law against lobbying the government when such a conflict exists?  (Which is always, of course.)  How can John Bogle not admit that he and his friends benefit from the Fiduciary Rule?

The irony, of course, is that indexation needs discovery agents, and this legislation will put more obstacles in their path.  Without price discovery (e.g., interest rates set by the market) and discovery agents (active investors, short sellers, upstart entrepreneurs), there is no vibrant economy that generates the returns Mr. Bogle’s customers covet.

It can’t be a coincidence that the government only recently discovered the merits of high-liquidity low-fee investing after a tripling of the S&P 500 in 8 years and a 35 year bull market in bonds.  Should we be thanking them for ringing the bell yet again?

~ Kevin Duffy, April 11, 2017

The Economist magazine on regulation

The collateral and permanent effects on legislation... are so very complicated, and very often much more important than the direct and temporary effects, that to make good laws seems a work fit rather for God than man.

~ The Economist, 1846

Apr 8, 2017

Lysander Spooner on the Constitution

But whether the Constitution really be one thing, or another, this much is certain — that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.

 ~ Lysander Spooner

Apr 5, 2017

Jim Grant on how markets do not always look ahead

Markets that supposedly and rightly ought to be looking ahead, sometime look back.

~ James Grant, Grant's podcast, January 27, 2017

(Grant was describing the spring of 1984 when U.S. T-bonds yielded 14% briefly in May while year-over-year CPI was 4% or less.  In other words, real yields were an astounding 10%.)