Set forth below is the text of a comment that I recently posted to another blog entry at this site:
You asked for some Bogle quotes. I tried to find a ‘variety’ of them, particularly on risk and on uncertainty. He does not say a lot on that; but that’s because his views never change. He is often forced to repeat the same few simple things over and over:
the fundamentals are often overwhelmed by the deafening noise of speculation—the price at which the stock market values each dollar of earnings.”
? John C. Bogle, The Clash of the Cultures: Investment vs. Speculation
speculation represented about 99.2 percent of the activities of our equity market system, with capital formation accounting for 0.8 percent.”
? John C. Bogle, The Clash of the Cultures: Investment vs. Speculation
“I don’t try to be clever at all. The idea that I could see what no one else can is an illusion.”
– The Little Book of Common Sense Investing by John C. Bogle, 2007
“Unless an investor has access to ‘incredibly high-qualified professionals,’ they should be 100 percent passive — that includes almost all individual investors and most institutional investors.”
John C. Bogle Legacy Forum, Bloomberg, 31-Jan-12
“Whatever the consensus on the EMH, I know of no serious academic, professional money manager, trained security analyst, or intelligent individual investor who would disagree with the thrust of EMH: The stock market itself is a demanding taskmaster. It sets a high hurdle that few investors can leap. “
– Bogle Financial Markets Research Center, 13-Apr-04
“While the apostles of the new so-called “behavioral” theory present ample evidence of how often human beings make irrational financial decisions, it remains to be seen whether these decisions lead to predictable errors that create systematic mispricings upon which rational investors can readily (and economically) capitalize.
– Bogle Financial Markets Research Center, 13-Apr-04
“Our markets have gone crazy, and there is 200 times as much speculation as there is investing,”
“Confidence can change overnight, but wherewithal cannot.”
Specifically on uncertainty and risk:
“In every mutual fund prospectus, in every sales promotional folder, and in every mutual fund advertisement (albeit in print almost too small to read), the following warning appears: “Past performance is no guarantee of future results.” Believe it!”
– The Little Book of Common Sense Investing by John C. Bogle, 2007
If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.
John (Jack) Bogle
Stipp: Much has been written about a new environment that investors are supposedly facing… slower growth….more volatility. I’m wondering what your take is on some of the recommendations that are out there for the need for a more active asset allocation, what’s known as a tactical allocation.
A lot of folks are saying that investors really must be much more opportunistic now, shift their assets around much more frequently.
Bogle: I do not believe that we should rethink the old principles of asset allocation. First, anything that’s opportunistic is by definition, I believe, a market-timing issue when to do it and when not to do it. If you could do it perfectly, I strongly commend it, but I don’t think anybody is able to do that. I perceive that we’re in for some tough times, and so I would emphasize an asset allocation that begins with this crude rule of thumb of having your bond position equal to something relating to your age. So if you’re 60, 60 percent bonds.
CNBC anchor Scott Wapner put the question to Bogle: “You say, ‘prepare for at least two declines of 25-30 percent, maybe even 50 percent, in the coming decade.’ For a buy-and-hold guy, that’s a little concerning, don’t you think?”
Bogle replied: Not at all. They come and go. The market goes up, and the market goes down. It’s never failed to recover from one of those 50 percent declines. I went through one in 1973-1974, I went through one in 2001, 2002, 2003; I went through another one 2008-2009. They’re kind of scary – often terrifying – but it’s typical.
Thanks for the quotes, Anonymous.
My reaction is that some of them are the pure gold that support my claim that Jack is one of few true giants in this field, second only to Robert Shiller in the benefits he has brought to millions of middle-class workers through his intelligent and tireless efforts. Others are typical of the smelly Buy-and-Hold garbage that we have all heard far too often from our Wall Street Con Men friends. Overall it is a mix.
I’ll comment specifically on three of the comments.
Bogle says re behavioral finance: “it remains to be seen whether these decisions lead to predictable errors that create systematic mispricings upon which rational investors can readily (and economically) capitalize.”
Then why doesn’t he help us in our efforts to open every board and blog on the internet to honest posting on safe withdrawal rates and scores of other critically important investment-related topics? That would be the best way to find out once and for all how powerful the insights developed from the last 33 years of peer-reviewed research are, would it not?
Bogle says: “I do not believe that we should rethink the old principles of asset allocation. First, anything that’s opportunistic is by definition, I believe, a market-timing issue when to do it and when not to do it. If you could do it perfectly, I strongly commend it, but I don’t think anybody is able to do that.”
I certainly agree that no one can engage in “perfect” market timing. To engage in perfect market timing, you would need to be able to exercise short-term timing as well as long-term timing. There is now 50 years of peer-reviewed research showing that that is impossible. But when he says that investors should ignore the last 33 years of peer-reviewed research, which shows that long-term timing (price discipline) always works and is always 100 percent required, he is causing vast amounts of human misery for millions of middle-class people. Huh? I would prefer to see him comment honestly on what the research says. The laws of the United States require it.
Bogle says: “In every mutual fund prospectus, in every sales promotional folder, and in every mutual fund advertisement (albeit in print almost too small to read), the following warning appears: “Past performance is no guarantee of future results.” Believe it!””
I agree that the 140 years of stock market history showing that Valuation-Informed Indexing is far superior to Buy-and-Hold in every possible way does not guaranty that this will continue to be the case. However, I see no guaranty in doing the OPPOSITE of what has worked for 140 years either. Again, my personal take is that being honest about what the last 33 years of peer-reviewed research shows is the best policy.
Rob
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