I fear that The Wall Street Journal’s opinion piece by hedge-fund specialist Bob Rice (“The Hedge-Fund Investment Puzzle,” June 1) conceals more than it reveals.
Yes, as he writes, “it is plain common sense” to seek “downside protection, strategies that tend to zig when markets zag, and broader opportunities for profit.” But while the idea of market timing is indeed simple, many hedge fund managers have tried, but precious few have succeeded.
Citing Benjamin Graham as the first “hedged fund” operator is an especially unfortunate example. “The trick,” Mr. Rice writes, was Graham’s “clever way to make money . . . whether it [the market] continued to rise, or started to fall.”
How did the hedged strategy work out in the bull market of the Roaring Twenties and thereafter? Thanks to Joe Carlen’s recent book, “The Einstein of Money,” we know the answer. Mr. Carlen carefully documents the returns earned in the “Benjamin Graham Joint Account” (the predecessor to Graham-Newman Corporation).
From 1929 through 1932 inclusive, the Graham account turned in a loss of 70%, compared to a loss of 64% for the S&P 500 Index. (Dividends are included in both cases.) “The strategy unraveled quickly,” Mr. Carlen writes. “There was no longer any reliable advantage to be gained from that kind of hedging.”
Despite Mr. Rice’s high confidence in hedge funds (based on unspecified data), forewarned is forearmed!
There have been so many press articles written about Vanguard, my new book, and my career that I don’t feel comfortable sending all of the stories to you. Instead, I’m attaching to this note six ofthe most prominent articles, and then posting the others on my eblog–In The Press.
2. Main Line Today, October 2012, “You Don’t Know Jack.” (But you will know him-a bit-after you read it.)
3. Inc., October, 2012, “The Finance Industry’s Only Living Saint.” (Over the top!)
4. Philadelphia Inquirer, December 9,2012. “Antidote to Market Mania: ‘Hold Tight.’ ” (Nice preview of Michael Smerconish’s Book Club gathering at Villanova last week. Full house.)
5. Research Magazine, October 2012. “How John Bogle Really Sees ETFs.” (More accurate than most characterizations of my views.)
6. Index Universe, September 28,2012. “The Clash of the Cultures .. . is the latest and perhaps best book by the … founder ofThe Vanguard Group.”
If that’s not, well, Enough for you, I have also posted the following on my eblog: “The Scourge of Speculation” (FIX Global); “Dim View of the Asset-Management Industry” (U S News and World Report); a comprehensive book review (Financial Analysts Journal); “Best Books for an Investing Novice,” (The Wall Street Journal,) selecting The Little Book of Common Sense Investing; “Forget Trading, Start Investing,” (Money-Life Show, Chuck Jaffe); “Fund Directors (Secret) Holdings” and “Bold Commitment and Personal Magic,” (Directors and Boards); “Bogle Walks the Talk,” (Corporate Board Member); “Bogle’s Lament for Investing’s Culture Clash,” (Toronto Globe and Mail); and-finally!-”Long Live Buy and Hold” (Investment Advisor).
You’ll enjoy the surprising Editor’s Note at the end of this final story, a nice way to end this huge compilation. The good news : there’s almost nothing left to be said!
As one who wrote a book entitled Enough., I’m wondering whether my mission to serve investors hasn’t now gotten “enough” attention in this 60th year of my career.
I raise this (delightful) concern following the “JCB Legacy Day” celebration on Wall Street three weeks ago, for this morning I received a copy of the current issue of Journal of Indexes, devoted almost entirely to my work-”The Bogle Issue.”
It includes comments from a wide range of industry participants about my role in making the financial world-and especially the mutual fund world-a better place for investors. Particularly interesting are the kind comments of our own Gus Sauter and Burt Malkiel, and the analysis of Chris Philips in “The Case for Indexing.” (Thanks, group!)
I’m attaching just a few excerpts from the 64 pages(!) published in JOI, including the crossword puzzle (pretty exciting to have that!).
I’ll get some extra copies of “The Bogle Issue” for those who want to see more of it … though I expect that most of you will find these attachments “enough.”