Comments on: John Bogle’s Prescription for Restoring Faith in Financial Markets http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 25 May 2012 21:48:35 +0000 hourly 1 http://wordpress.org/?v= By: Joe http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/comment-page-1/#comment-441714 Joe Wed, 20 Jan 2010 00:25:28 +0000 http://allfinancialmatters.com/?p=4401#comment-441714 No matter what Congress or the banks do, it's going to be a long, long time before the public will trust our financial industry again. Or at least until another generation of people pops up that are too young to remember everything that's happened in the past 5-10 years. No matter what Congress or the banks do, it’s going to be a long, long time before the public will trust our financial industry again. Or at least until another generation of people pops up that are too young to remember everything that’s happened in the past 5-10 years.

]]> By: Dan http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/comment-page-1/#comment-441713 Dan Tue, 19 Jan 2010 21:27:51 +0000 http://allfinancialmatters.com/?p=4401#comment-441713 The level of taxes typically proposed for these sorts of schemes are small. This is because the target of such taxes are not individual investors but institutions relying on high leverage ratios to extract tiny profit margins available in most short term investments. These levered strategies are purely speculative in that they generally do not reflect any fundamental of the investment, and even a very small tax, perhaps less than 1%, would be sufficient to render them unprofitable. As a long term investor I am more than willing to pay that penalty if it could be be demonstrated to me that the result would be significantly lower leverage ratios (and, consequently, lower volatility) in financial markets. It is now clear that the high leverage ratios used on Wall Street were a critical component of the 2008 financial crisis. More information: http://en.wikipedia.org/wiki/Financial_transaction_tax http://en.wikipedia.org/wiki/Tobin_tax The level of taxes typically proposed for these sorts of schemes are small. This is because the target of such taxes are not individual investors but institutions relying on high leverage ratios to extract tiny profit margins available in most short term investments. These levered strategies are purely speculative in that they generally do not reflect any fundamental of the investment, and even a very small tax, perhaps less than 1%, would be sufficient to render them unprofitable.

As a long term investor I am more than willing to pay that penalty if it could be be demonstrated to me that the result would be significantly lower leverage ratios (and, consequently, lower volatility) in financial markets. It is now clear that the high leverage ratios used on Wall Street were a critical component of the 2008 financial crisis.

More information:
http://en.wikipedia.org/wiki/Financial_transaction_tax
http://en.wikipedia.org/wiki/Tobin_tax

]]> By: Harm http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/comment-page-1/#comment-441712 Harm Tue, 19 Jan 2010 20:54:51 +0000 http://allfinancialmatters.com/?p=4401#comment-441712 He wants to tax short term profits in IRA accounts? My opinion of him just took a dive. He wants to tax short term profits in IRA
accounts? My opinion of him just took a dive.

]]> By: JT http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/comment-page-1/#comment-441710 JT Tue, 19 Jan 2010 19:04:44 +0000 http://allfinancialmatters.com/?p=4401#comment-441710 In addition, policy makers ought to join their comrades in jail as well for their role in this crisis. For example, Greenspan and Bernanke for holding interest rates too low for too long; Paulson, for shoving a $700 billion dollar bill down our throats that was opposed by 300-to-1 by the citizens in order to prevent the "impending collapse" of the world as we know it; and Geithner, for acting according to the interests of Wall Street and his buddies as Goldman Sachs (oh, and not paying his taxes either). I am 100% sure these decisions would be beneficial for America and actually get us on a path to recovery. Yes, there will be pain and it will hurt, but the bust is a <strong>necessary</strong> correction to the inflated values of the boom. You should all agree with my points that I make in the above paragraphs. The question is: where are the handcuffs? In addition, policy makers ought to join their comrades in jail as well for their role in this crisis. For example, Greenspan and Bernanke for holding interest rates too low for too long; Paulson, for shoving a $700 billion dollar bill down our throats that was opposed by 300-to-1 by the citizens in order to prevent the “impending collapse” of the world as we know it; and Geithner, for acting according to the interests of Wall Street and his buddies as Goldman Sachs (oh, and not paying his taxes either).

I am 100% sure these decisions would be beneficial for America and actually get us on a path to recovery. Yes, there will be pain and it will hurt, but the bust is a necessary correction to the inflated values of the boom.

You should all agree with my points that I make in the above paragraphs. The question is: where are the handcuffs?

]]> By: JT http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/comment-page-1/#comment-441709 JT Tue, 19 Jan 2010 18:57:24 +0000 http://allfinancialmatters.com/?p=4401#comment-441709 The process of restoring faith of investors must begin with a demand that every agent/owner of investment America that engaged in fraudulent activity turn themselves in now, because we will prosecute each and every one of them. There is nothing wrong with speculation, but intentionally selling worthless assets at inflated values, knowing they are nothing more than a pile of dog poop, will not be tolerated! What we need is congressional action to establish a reinstate mark to market, leverage limits and Glass Steagall--encapsulated by the phrase “Stop the looting; start the prosecuting!” This principle will require institutional managers (1) to stop lying; (2) to obey the law; (3) to go to jail; and (4) to not pass Go! :) The process of restoring faith of investors must begin with a demand that every agent/owner of investment America that engaged in fraudulent activity turn themselves in now, because we will prosecute each and every one of them. There is nothing wrong with speculation, but intentionally selling worthless assets at inflated values, knowing they are nothing more than a pile of dog poop, will not be tolerated! What we need is congressional action to establish a reinstate mark to market, leverage limits and Glass Steagall–encapsulated by the phrase “Stop the looting; start the prosecuting!”

This principle will require institutional managers (1) to stop lying; (2) to obey the law; (3) to go to jail; and (4) to not pass Go!

:)

]]> By: John http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/comment-page-1/#comment-441708 John Tue, 19 Jan 2010 18:17:31 +0000 http://allfinancialmatters.com/?p=4401#comment-441708 It is the speculator that helps keep markets liquid. It is the speculator that takes the other side of the trade that allows farmers to know the price for their crop months in the future. It is the speculator that finds mis-pricing of securities and arbitrages them away. To claim that long term investors are somehow more virtuous, and deserving of preferred treatment, doesn't hold. It is the speculator that helps keep markets liquid. It is the speculator that takes the other side of the trade that allows farmers to know the price for their crop months in the future. It is the speculator that finds mis-pricing of securities and arbitrages them away.

To claim that long term investors are somehow more virtuous, and deserving of preferred treatment, doesn’t hold.

]]> By: BG http://allfinancialmatters.com/2010/01/19/john-bogles-prescription-for-restoring-faith-in-financial-markets/comment-page-1/#comment-441706 BG Tue, 19 Jan 2010 17:09:05 +0000 http://allfinancialmatters.com/?p=4401#comment-441706 I like Bogle -- he just seems to come across as a common-sense kind of person. Unfortunately some of the things he is discussing are problems that arose out of his own creation: namely the index fund. People own index funds now, not shares in a company. The index fund manager (Vanguard, Fidelity, Barclays, etc) makes all the shareholder votes, on your behalf, of the shares you indirectly hold in the index fund. Do the index fund managers vote they way you think they should? Unfortunately its just the nature of the beast. A solution could be to allow the index fund shareholders (ie; you and me) to have the ability to vote at shareholder meetings -- if we chose to do so. Of course this would prohibitively increase costs and kill off the index fund industry -- which is perhaps a good thing. We need to return back to the olden days when people actually 'owned' a part of companies -- and voted for what they believe in. Index funds were great when they were started, but now that the vast majority of shares are owned in a few huge investment firms, I no longer believe that the typical index fund is such a good deal (or the stock market in general for that matter). I like Bogle — he just seems to come across as a common-sense kind of person. Unfortunately some of the things he is discussing are problems that arose out of his own creation: namely the index fund. People own index funds now, not shares in a company.

The index fund manager (Vanguard, Fidelity, Barclays, etc) makes all the shareholder votes, on your behalf, of the shares you indirectly hold in the index fund. Do the index fund managers vote they way you think they should?

Unfortunately its just the nature of the beast. A solution could be to allow the index fund shareholders (ie; you and me) to have the ability to vote at shareholder meetings — if we chose to do so. Of course this would prohibitively increase costs and kill off the index fund industry — which is perhaps a good thing.

We need to return back to the olden days when people actually ‘owned’ a part of companies — and voted for what they believe in.

Index funds were great when they were started, but now that the vast majority of shares are owned in a few huge investment firms, I no longer believe that the typical index fund is such a good deal (or the stock market in general for that matter).

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