{"id":837,"date":"2013-06-06T10:05:11","date_gmt":"2013-06-06T15:05:11","guid":{"rendered":"http:\/\/johncbogle.com\/wordpress\/?p=837"},"modified":"2013-06-06T10:05:11","modified_gmt":"2013-06-06T15:05:11","slug":"wall-street-journal-letter-to-the-editor","status":"publish","type":"post","link":"https:\/\/johncbogle.com\/wordpress\/2013\/06\/06\/wall-street-journal-letter-to-the-editor\/","title":{"rendered":"Wall Street Journal Letter to the Editor"},"content":{"rendered":"<p>Jack Bogle&#8217;s letter to the editor of <em>The Wall Street Journal<\/em> regarding a recent opinion piece about hedge funds was published in the June 6, 2013 edition.<\/p>\n<p><a href=\"http:\/\/online.wsj.com\/article\/SB10001424127887323469804578523612570406102.html\" target=\"_blank\">Hedge Funds Are Hardly a Panacea (subscription required)<\/a><\/p>\n<p>I fear that The Wall Street Journal&#8217;s opinion piece by hedge-fund specialist Bob Rice (&#8220;The Hedge-Fund Investment Puzzle,&#8221; June 1) conceals more than it reveals.<\/p>\n<p>Yes, as he writes, &#8220;it is plain common sense&#8221; to seek &#8220;downside protection, strategies that tend to zig when markets zag, and broader opportunities for profit.&#8221; But while the idea of market timing is indeed simple, many hedge fund managers have tried, but precious few have succeeded.<\/p>\n<p>Citing Benjamin Graham as the first &#8220;hedged fund&#8221; operator is an especially unfortunate example. &#8220;The trick,&#8221; Mr. Rice writes, was Graham&#8217;s &#8220;clever way to make money . . . whether it [the market] continued to rise, or started to fall.&#8221;<\/p>\n<p>How did the hedged strategy work out in the bull market of the Roaring Twenties and thereafter? Thanks to Joe Carlen&#8217;s recent book, &#8220;The Einstein of Money,&#8221; we know the answer. Mr. Carlen carefully documents the returns earned in the &#8220;Benjamin Graham Joint Account&#8221; (the predecessor to Graham-Newman Corporation). <\/p>\n<p>From 1929 through 1932 inclusive, the Graham account turned in a loss of 70%, compared to a loss of 64% for the S&#038;P 500 Index. (Dividends are included in both cases.) &#8220;The strategy unraveled quickly,&#8221; Mr. Carlen writes. &#8220;There was no longer any reliable advantage to be gained from that kind of hedging.&#8221; <\/p>\n<p>Despite Mr. Rice&#8217;s high confidence in hedge funds (based on unspecified data), forewarned is forearmed!<\/p>\n<p>John C. Bogle <\/p>\n<p>Valley Forge, Pa. <\/p>\n<p><em>Mr. Bogle is the founder of the Vanguard Group. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Jack Bogle&#8217;s letter to the editor of The Wall Street Journal regarding a recent opinion piece about hedge funds was published in the June 6, 2013 edition. Hedge Funds Are Hardly a Panacea (subscription required) I fear that The Wall Street Journal&#8217;s opinion piece by hedge-fund specialist Bob Rice (&#8220;The Hedge-Fund Investment Puzzle,&#8221; June 1) [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,7,5],"tags":[],"class_list":["post-837","post","type-post","status-publish","format-standard","hentry","category-commentary","category-op-eds","category-press-clippings"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/posts\/837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/comments?post=837"}],"version-history":[{"count":1,"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/posts\/837\/revisions"}],"predecessor-version":[{"id":838,"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/posts\/837\/revisions\/838"}],"wp:attachment":[{"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/media?parent=837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/categories?post=837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/johncbogle.com\/wordpress\/wp-json\/wp\/v2\/tags?post=837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}