I’m sending along some of the press clippings that you may have missed during the dog days of summer, now rapidly coming to a close:
M/1. Bogle Weighs In On Key Issues. Morningstar’s summary of my extensive interview at the 25th Annual Morningstar Investment Conference. Responding to tough questions, I gave blunt—but, I hope, tactful—answers.
FA/1. Bogle Pressures SEC On Fund Firm Fiduciary Rule. A rare story from Fund Action on the work that I’ve been doing to persuade the SEC to deal with the (almost) industry-wide conflict between the interests of fund managers and the interests of fund shareowners.
HK/1. From Hong Kong, The Ten ___iest People On Wall Street. It may well be that Maria Bartiromo deserves to be ranked #1, but it’s a tad idiotic for me to be #6, especially compared to Tim Geithner (#7) and Jamie Dimon (#8), both of whom are three decades younger than I. (To avoid the possibility of violating company policy, I will not provide translation.)
These are interesting times. Be sure to enjoy them.
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!
Jack Bogle delivered a landmark speech before the Boston Security Analyst Society on May 17, 2013.
In this speech, he chronicles, and decries, the radical change in the mutual fund industry’s culture over the span of his long career–from a profession with elements of a business to a business with elements of a profession.
The speech also tells the stories of two dates that will live in infamy:
1) April 7, 1958–the date the federal courts, despite opposition from the SEC, opened the floodgates to allow mutual fund management companies to go public, a date that will live in infamy for mutual fund shareholders.
2) December 31, 1975–the date the first index fund was founded, a date that will live in infamy for mutual fund managers.