Memo to Veterans and Principals
Mike - Dec 08, 2015

To: Veterans and Principals
From: John C. Bogle
Re: Vanguard in the News
Date: December 3, 2015

Hi All,

Favorable press coverage of our firm seems to be growing just as rapidly as our cash flow. (Well, maybe not quite as fast!) I’m attaching five of the more important news stories with this note.

1. “Vanguard’s Gain is Wall Street’s Pain.” Bloomberg Business, December 1, 2015. I urge all of you to read this remarkably perceptive article by veteran journalist Eric Balchunas. It discusses the often taboo subject of our impact on the entire field of investment, estimating that by 2020 we will have reduced Wall Street’s revenues by $40 billion per year. (Actually, that figure is underestimated.)

2. “The George Washington of Investing Wants You For The Revolution.” NPR’s Chris Arnold wrote this story in connection with his radio segment about me for NPR’s Morning Edition, which you can listen to here. Chris wrote a companion piece about asset allocation, with suggestions from David Swensen, me, and Gretchen Tai of Hewlett-Packard.

3. “John Bogle’s legacy: Falling prices everywhere.” On November 19, 2015, Mitch Tuchman of MarketWatch again refers to “the Vanguard Effect”—the impact of our low pricing strategy on our peers. He concludes: “If better, cheaper advice along with falling prices for funds in a race to the bottom, bring it on!”

4. “The best strategy for everyday investors, according to investing legend Jack Bogle.” In Business Insider, on November 3, 2015, Kathleen Elkins concludes: “Set yourself up for financial success by investing in low-cost index funds.”

5. “Cost Always Matter, So Pick This Winning Read.” Financial adviser Nick Train, writing in FT Adviser on October 29, 2015, quotes at length from the recently published “Classic Edition” of John Bogle on Investing—The First 50 Years. (Curiously, he doesn’t get around to mentioning the name of the book.) He shares my view that “picking winners is a loser’s game.”

Please enjoy this continuing stream of affirmation for the work we do—you and I alike—to serve investors with excellence.

Best,
Jack


Memo to Veterans and Principals
Mike - Dec 08, 2015

To: Vanguard Veterans and Principals
From: John C. Bogle
Date: September 4, 2015
Re: Vanguard in the Press

Things didn’t slow down much this summer, and I’m pleased to attach another eight stories of special interest.
(1) “The Power of Story,” Forbes, August 22, 2015. It’s always nice to be compared to a genius—in this case Albert Einstein. Here, we are both cited for, “a compelling narrative that inspires a shared sense of mission . . . [and] a long and great legacy.” If the story is valid, it is up to you who lead our crew to determine how long, and how great.

(2) “. . . king of the tracker funds,” The (London) Telegraph, July 30, 2015. (Yes, that’s a young me, age 39, in the photo.) Our John Woerth handled the story with journalist Ed Monk, but later had to correct two errors. “. . . born out of corporate frustration” should read “corporate conflict.” And . . . “go gently into that good night” should read “go gentle.”

(3) “Why 99% of trading is pointless,” MarketWatch, July 30, 2015. Here, journalist Mitch Tuchman puts his own harsh spin on my long-standing view that stock trading is a loser’s game for investors and a winner’s game for brokers.

(4) “The super secret weapon of CEOs,” BBC, July 15, 2015. In Elizabeth MacBride’s view, that super secret weapon is poetry, helping leaders to “adopt a certain way of thinking about . . . broad concepts and challenges.” Her first example cites me and “Ozymandias” (read the story), and my concept that “caring . . . must be the soul of any institution worth its salt.”

(5) “Has the Index Fund Won?” Money, August 2015. All of us at Vanguard know the answer to that question, and I reaffirm it in this interview. “It certainly has.” While some of my responses to journalist Pat Regnier are apparently controversial, none of them are new, and most of them—on ETFs, international allocations, cost, and transparency—reflect positions that I’ve publically held for at least two decades.

(6) (7) (8) Three stories on the recent unpleasantness in the stock market: CNBC on August 24, Market Watch on August 27, and on CNBC again on August 28, 2015. My message remains consistent (“Stay the Course”), but cautious (in this case to Elizabeth MacBride on CNBC), “. . . stay invested, control your fear, and keep your fingers crossed.”

Hope you all had a great summer.

Best,
Jack


Memo to Veterans and Principals
Mike - Dec 08, 2015

To: Veterans and Principals
From: John C. Bogle
Date: July 15, 2015
Subject: The Press Coverage Continues

1. FORTUNE, June 16, 2015. “Investors first is slowly taking hold in finance.” This article by Eleanor Bloxham begins with a review of my June speech to CFA/Philadelphia, and then discusses the messages in two of my early books, recently republished as “Classic Editions” with new forewords. (Yes, we’re making arrangements to offer them together to the crew in a “boxed” package.)

2. FORBES, June 29, 2015. “Tiger’s Lair: Inside Vanguard Founder Jack Bogle’s Busy Office.” Some insightful comments. But one more photo of my desk chair—empty—gives me the willies.

3. MARKET WATCH, June 18, 2015. “ . . . Insight that triples retirement returns.” Solid insights by Mitch Tuchman, focused on one of Vanguard’s founding principles: Seek “relative predictability” (to comparable peers) in fund performance, and win with our huge cost advantage.

4. BUSINESS INSIDER, July 8, 2015. “Investing pros John Bogle, Warren Buffett, and Charlie Munger all agree on the best way for the average person to invest.” (I don’t think I need tell you what that way is!) It’s always fun to have Vanguard 500 Index Fund endorsed by experienced experts such as Warren and Charlie.

Enjoy! Hope you are having a good summer.

Jack


Memo to Veterans and Principals
Mike - Dec 08, 2015

To: Veterans and Principals

From: John C. Bogle

Date: June 11, 2015

RE: Vanguard in the News

(1) I’m delighted to start this list of news stories with a splendid full-page essay in the Financial Times on May 27, 2015; Investment: Vanguard’s Commanding Position, by Stephen Foley. You’ll be familiar with many of the events he describes but perhaps less so with the history of the nautical theme that is not only featured, but described at length. NOTE: The online version of the Financial Times article was accompanied by a wonderful video focused on our nautical heritage. It’s short and worth watching. Click here to view the video.

(2) John Rekenthaler’s Morningstar essay, Jack Bogle’s Great Insight, June 11, 2015. In our interview, John quickly picked up on one of Vanguard’s founding pillars! Offering funds with relative predictability, designed to parallel the competitive peer groups, avoiding the performance saving that provide elation to investors and then disappointment (as cash pours out). The idea: to help investors avoid the behavioral problems so often engendered by moving from one fund to another.

John cites our Vanguard Total Stock Market Index Fund as the classic example of relative predictability (now known as high R2, measured by fund returns relative to its comparable index(es) or peers). Of course that’s true. But he fails to mention the high R2s of most of our actively managed funds . . . Wellington 0.97, Wellesley 0.96, Morgan 0.98, Strategic Equity 0.98, Windsor II 0.97, Windsor 0.95, even PRIMECAP 0.93 and Health Care 0.92. Our major municipal bond funds came in at 0.98 and 0.97. This is no accident, merely the result of a multi-manager strategy and (to a lesser extent) the right portfolio standards we demand of many of our active managers.

(3) Why Bogle and Buffett tell investors to ignore market noise, Market Watch, June 4, 2015, by Mitch Tuchman. You all know this consistent message; the photos are sort of clever.

(4) Vanguard ties help Wellington buck weak trend in active funds, Reuters, May 29, 2015, by Ross Kerber. Wellington Fund has for many years been a successful performer for its fund shareholders—and even better for Wellington Management Company. See final paragraph, which raised some provocative questions.

(5) Low cost is just the first step in picking funds: Bogle. A lengthy interview with me by Elizabeth MacBride, posted on CNBC’s website on May 26, 2015. Lots of interesting insights, plus the (obligatory?) “five rules” for selecting an actively managed fund.

NOTE: Interesting Item of the Week. In my last mailing, I suggested that the photo of me in the casino must have been photo shopped. It was! As one veteran crew member informed me, the image was from a promotional piece for the film “Casino,” with my face replacing that of its star, Robert deNiro.

The beat goes on. Enjoy!

Jack


Memo to Veterans and Principals
Mike - Jul 24, 2015

Memo to Veterans and Principals
From John C. Bogle
May 27, 2015
Recent “Vanguard in the Press” Articles
 

  • Fees on Mutual Funds Fall. Thank Yourself. The New York Times, May 9, 2015. Once again, journalist Jeff Sommer cites my 2014 Financial Analysts Journal paper on “all-in” fund expenses. One more nail in the coffin of high-cost funds.
  • 6 Ways Vanguard has Changed the Way People Invest. Also on May 9, Chuck Jaffe, writing on MarketWatch, extols our “simply being a good steward of people’s money.” (Chuck’s piece is a model of accuracy . . . except for the first sentence of the first paragraph on page 4.) I prefer to say that at Vanguard, we sell what we make, while too many of our competitors make what will sell.
  • The Five Members of the Advisor’s Pantheon. In its annual selection of the IA 35 (most influential investors), Investment Advisor magazine highlights these five leaders. (Always nice to be linked to the legendary Benjamin Graham!)
  • Hillary Clinton Has a Smart and Surprisingly Simple Investment Strategy. And, as VOX reporter Timothy Lee reports on May 18, 2015, her $25 million holding in Vanguard 500 Index Fund is by far her largest equity holding. (Not quite sure why my photo appeared . . . in tuxedo, yet!)
  • John Bogle Stands Pat on Wall Street Bet. On MarketWatch (May 21, 2015), correspondent Mitch Tuchman notes my theme in an earlier CNBC interview: “Buy the entire stock market . . . then get out of the casino, and never show yourself there again.” The story is illustrated with a picture of me  . . . in a casino! (Photoshop must be at work here.)
  • Lightning Strikes: The Creation of Vanguard . . . A lengthy late-April review of my essay in the 40th Anniversary Issue of the Journal of Portfolio Management, along with my (candid) interview with the “Practical Applications” booklet published by Institutional Investor Journals.

 
Thanks for all you have done to make Vanguard who we are today.

Best,

Jack


Memo to Veterans and Principals
Mike - Jul 24, 2015

To: Vanguard Veterans and Principals
From: John C. Bogle
Date: May 12, 2015
Re: Recent Vanguard News Items
 

The media attention on our structure and strategies goes on unabated—or maybe has even increased in intensity. I attach some of the major items for the period ended May 8, 2015.
 

  • “Financial Pros Choose Indexing for Retirement Savings.” In April, Bloomberg Business cited studies showing that fully 70%(!) of financial professionals who recommend mutual funds—“people who are paid to make money for investors”—side with our index philosophy. (42% of all investment pros choose index funds, versus only 18% who recommend actively managed funds.) Of the remainder, 17% recommend individual stocks and bonds; 14% recommend real estate.
  • “Bogle vs. Grant in the Great Fund Debate.” Jason Zweig, The Wall Street Journal, May 3, 2015. (Despite the photo, I was not yelling! Photoshop?) Jason may have seen the result as a “split decision;” to me, the winner was obvious. In his newsletter, Grant’s Interest Rate Observer, Jim Grant conceded that the 500 Index Fund’s superiority over active managers “may be generally true … for the average lay public investor … [and] for the run-of-the-mill … professional investor.” But for “not a few people in this room, it certainly isn’t true.” (He names no names.) In the Philadelphia Inquirer, Joseph N. DiStefano presents a detailed summary of the debate. It’s a largely accurate and amusing, if hardly conclusive, story.
  • “The Warren Buffett Bookshelf.” The Wall Street Journal cites 11 of Mr. Buffett’s favorite books, by Benjamin Graham, Phillip A. Fisher, John Brooks, John Maynard Keynes, and yes, John C. Bogle, whose The Little Book of Common Sense Investing was the only book recommended in Mr. Buffett’s recently released annual report of Berkshire Hathaway.
  • Two interviews by Olivier Ludwig of ETF.com—“Broker Behavior Costs Investors” and “Investors Are Now Driving Ethics”—focus on the issue of fiduciary duty, and conclude with the now-familiar phrase, “If you simply own the (broad stock) market in a cheap index fund, it is guaranteed to give you your fair share of the market returns.”
  • “Why Hair-Trigger Stock Traders Lose the Race.” The Wall Street Journal, April 10, 2015, Jason Zweig. Jason illustrates the rapid trading in ETFs, (turnover 1244% last year), and warns that, “in the long run, he who trades the least will end up with the most.” (He fails to note the huge increase in ETF trading volume: for the hundred largest ETFs last year, $16 trillion, almost as large as the $18 trillion volume for the 100 largest common stocks.)
  • May 1, 2015, Jason Zweig wrote a story about the end of fixed commission on stock trades, on May 1, 1975 (“May Day”). “Remembering How May Day Remade Wall Street.” It includes a comment from me about the self-interest. (I was a vigorous and unpopular proponent of the change). Jason also notes our own May Day, one of the anniversaries we celebrate. Together, these articles should add to your understanding of present tradition and past history.
  • “. . . Just buy an index fund.” The caption of a cartoon published by Grant’s Interest Rate Observer on May 1, 2015, humorously (I guess!) citing the conclusion of Warren Buffett and Charlie Munger at the recent Berkshire Hathaway Annual Meeting . . . and a fine way to conclude this note.

Best,

Jack


Memo to Veterans and Principals
Mike - Jul 24, 2015

 

TO: Veterans and Principals
FROM: John C. Bogle
DATE: April 1, 2015
RE: Bloomberg Markets Article
 

This story from the April 2015 issue of Bloomberg Markets magazine features some speculation about who might be able to fill the empty chair you see on the first page of the attachment when I’m gone. The article’s title asks the question, “Is There a Next Jack Bogle?” Based on the authors’ extensive interview with me, they conclude, “Not if You Ask Jack Bogle.” (In fact, all I said was, “I think it’s crystal clear that nobody, nobody, plunges into this battle to build a better industry with any more enthusiasm than I do.”)
 

My potential successors apparently include our CEO Bill McNabb; BlackRock’s head of iShares Mark Weidman; “Smart Beta” pioneer Rob Arnott of Research Affiliates; my son John C. Bogle, Jr. of Bogle Investment Management, hedge fund manager Cliff Asness of AQR; University of Pennsylvania professor Jeremy Siegel of “smart beta” firm WisdomTree Investments; and Andrew Lo of MIT, developer of the “Adaptive Markets Hypothesis.”
 

The article seems to focus on whether or not these potential successors—often with new indexing methodologies—can continue to drive indexing forward. But, along with Bill Sharpe and other respected academics,[1] I believe that traditional market-cap-weighted broad-market indexes (S&P 500 and the Total U.S. Stock Market) will endure long after most—if not all—of these other strategies have been abandoned.
 

I wish that the authors of the article had focused more on who might continue my passionate investor advocacy—including my efforts to establish a standard of fiduciary duty for all money managers. But we rarely get what we wish for…
 
 
 
Best,

Jack

[1] To say nothing of Warren Buffett, who put his reputation and his so-far-winning wager on outpacing a particular hedge fund (and his wife’s estate!) on the line with his confidence in our Vanguard 500 Index Fund. His recent endorsement of my Little Book of Common Sense Investing, by the way, has served to increase sales in recent weeks from about 240 per week (pretty good for a book published more than eight years ago) to 750 per week, an increase of more than 200%.


Memo to Veterans and Principals
Mike - Jul 24, 2015

TO: Veterans and Principals

FROM: John C. Bogle

DATE: March 16, 2015

RE: Financial Times Op-Ed
 

I penned a commentary for today’s Financial Times “Fund Management” section about the role of exchange-traded funds in the growth of indexing. I describe my concerns with the rapid trading so common with ETFs. The first and largest ETF—the $190 billion SPDR S&P 500 ETF—is the most widely traded equity in the world, averaging over $20 billion in turnover every day. As I wrote in the article, “broad-market exchange traded funds are fine, as long as investors don’t trade them.”
 

The front page of the FTfm section picked up that commentary in an article by journalist Chris Newlands. The headline of the article is rather over-the-top—“John Bogle renews attack on exchange traded funds”—but the facts presented by Mr. Newlands are accurate.
 

I like to think that Vanguard is a firm in which constructive debate is tolerated, perhaps even encouraged. My piece in today’s FTfm is a prime example of a case where, as Bill McNabb recently said, “reasonable people can disagree.”
 
 
 

Best,

Jack


Memo to Veterans and Principals
Mike - Jul 24, 2015

 

TO: Veterans and Principals

FROM: John C. Bogle

DATE: March 11, 2015

RE: “The Beat Goes On”

I’m not sure that I understand why the media has given so much recent attention to the principles that I’ve tried to develop as Vanguard’s hallmark. But the beat goes on.

  • Jack Bogle’s Success Principles to Live By: CNBC article by Elizabeth MacBride, February 17, 2015. Her story focuses pretty heavily on my eight rules of leadership (I wasn’t counting!). But it also notes the human side of my career, and her story is rather sentimental. So be it.

 

 

  • John Bogle Enters White House Fray Over Broker Conflicts: Market Watch, by Mitch Tuchman, February 26, 2015. My work with the Council of Economic Advisors, The National Economic Council, and the Department of Labor was really thrilling . . . especially since we all agreed on the need to move forward with fiduciary duty for retirement plans.

 

  • Saving for Retirement: Obama Proposal Sets Up Wall Street Fight: Associated Press, February 23, 2015. The conclusion of the efforts noted above was expressed by the President on a televised speech. The Department of Labor is expected to propose an expanded standard of fiduciary duty applicable to retirement plan advisors, probably several months from now. Wall Street will fight fiercely to prevent the expansion of the fiduciary standard, though I wonder if any of the detractors wants to say, “Let’s put the clients second.”

 

With all the headlines and fine stories, it’s little wonder that Vanguard’s lead over our competitors continues to burgeon.

 

Best,

Jack


Memo to Veterans and Principals
Mike - Jul 24, 2015

 

To:      Veterans & Principals

Date: March 3, 2015

Re:      Berkshire Hathaway 2014 Annual Letter to Shareholders

 

I thought you might enjoy this excerpt from Warren Buffett’s annual letter, published this past weekend.

 

*****

 

The commission of the investment sins … is not limited to “the little guy.” Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades. A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool’s game.

 

There are a few investment managers, of course, who are very good – though in the short run, it’s difficult to determine whether a great record is due to luck or talent. Most advisors, however, are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship. Rather than listen to their siren songs, investors – large and small – should instead read Jack Bogle’s The Little Book of Common Sense Investing.

 

Decades ago, Ben Graham pinpointed the blame for investment failure, using a quote from Shakespeare: “The fault, dear Brutus, is not in our stars, but in ourselves.”