10 Questions for John Bogle

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Bylo Selhi
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Re: 10 Questions for John Bogle

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Re: 10 Questions for John Bogle

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Bylo Selhi wrote:Bogle's new book is out: The Clash of the Cultures: Investment vs. Speculation • $20 tax-exempt and shipped to Canada from Book Depository. (As opposed to buying from their owners for CA$22.53 plus tax plus shipping.)

I placed my order earlier today.
Bylo - I missed this at the time - was away in northern Quebec in August. Have you read it? Is it good. I ordered my copy a couple of days ago.

One reason for this note - is that the following quote from Jack Bogle is astounding - wow -
So, if you want to look at it hard-nosed, 99.2% of what goes on in the market is speculation and 0.8% is an investment in the stock market.
99.2% of market $'s is simply moving equity paper around and around via trades

0.8% of market $'s generates new companies and markets - and provides the capital for it

---- later ---- from Bogle in video and text at recent Morningstar-
Bogle's Outlook for the Market -- The Vanguard founder expects muted returns of less than 5% for stocks and 0% for bonds after inflation.
“The search for truth is more precious than its possession.” Albert Einstein
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Re: 10 Questions for John Bogle

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Interesting video. Jack Bogel suggests weighting bond portfolio towards corporates rather than government bonds. Maybe 60 or 70 percent corporate in a bond portfolio. Just a question, perhaps even uninformed, but isn't the whole point of a bond ^portfolio is that it is completely safe? And are you not putting some kind of insecurity in your supposedly secure bond portfolio by buying corporate bonds? If you were going to go with a publicly traded company wouldn't you be better with dividends and the possibility of capital growth, rather than bonds, which may not really pay out what you put into them?
Joe
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Re: 10 Questions for John Bogle

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gouthro wrote:Interesting video. Jack Bogel suggests .... but isn't the whole point of a bond ^portfolio is that it is completely safe?
How can it be "completedly safe"? - Can't an unexpected inflation bubble kill your return of bonds? (Germany got so hit before WW II)
gouthro wrote:..
And are you not putting some kind of insecurity in your supposedly secure bond portfolio by buying corporate bonds?
Can't they all default at some points?

I was recently reading about the California public pensions - read -
Dale Kasler of the Sacramento Bee reports,
CalPERS sues Compton over missed payments:
A second California city has fallen behind on its payments to CalPERS, prompting a lawsuit by the big pension fund.

Compton owes $2.7 million to the California Public Employees' Retirement System, the pension fund said Monday.

CalPERS sued the city in Sacramento Superior Court after Compton failed to make its required payments for September.
What does a "guarantee" or "promise" - about the future really mean?
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Re: 10 Questions for John Bogle

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Well, George, perhaps we should add the little word 'relatively' to the safe. People buy bonds because they see them as 'relatively' safe investments. That is why Jack Bogel was recommending them.

joe
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Re: 10 Questions for John Bogle

Post by George$ »

gouthro wrote:Well, George, perhaps we should add the little word 'relatively' to the safe. People buy bonds because they see them as 'relatively' safe investments. That is why Jack Bogel was recommending them.

joe
I would always defer to what Jack Bogle states - he is a great indivudal - who knows so much more than I do. But it may not all be as simple or some as you say. Government bonds vs Corporate bonds - or how long to hold, 2 years vs 20 years etc.

Jack Bogle's recent video points how difficult the times are - see -
The Vanguard founder expects muted returns of less than 5% for stocks and 0% for bonds after inflation.

Or look carefully at what Bill Gross wrote in his May 2012 monthly outlook-
Wall Street Food Chain
In particular look at what chart-1 states about what bonds did in the past and what choices it has for the future.

And a short while I studied a hypothetical 40-year- RRSP DC pension - via various holdings of only bonds or only equities etc - out come is about the same.
Look at the last two pages and the memo
(But no guarantee the next 40 years would look the same.]

Best.

George-II
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Re: 10 Questions for John Bogle

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Patrick McKeough weighs in on the bonds vs stocks debate. In general, he feels that it was reasonable to hold bonds years ago, when there was a good yield. In fact he recommended that people hold a substantial proportion of bonds. With today's miserly return and the possibility of infation cutting into bonds, he tends to think that it is more reasonable to hold stocks. If one does hold bonds, however, he thinks it better to hold a short term bond index--xsb, i believe.
http://www.tsinetwork.ca/daily/retireme ... -strategy/

joe
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Re: 10 Questions for John Bogle

Post by ig17 »

gouthro wrote:If one does hold bonds, however, he thinks it better to hold a short term bond index--xsb, i believe.
XSB YTM 1.52% - MER 0.28% = 1.24%. That's worse than cash (HISA).
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Re: 10 Questions for John Bogle

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That's worse than cash (HISA).
Also worse than a GIC ladder, which will get 2.2 or so at the cost of liquidity.
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Re: 10 Questions for John Bogle

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ig17 wrote:
gouthro wrote:If one does hold bonds, however, he thinks it better to hold a short term bond index--xsb, i believe.
XSB YTM 1.52% - MER 0.28% = 1.24%. That's worse than cash (HISA).
In a non-registered account, after tax, the comparison to a HISA is even worse.
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Re: 10 Questions for John Bogle

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Shakespeare wrote:
That's worse than cash (HISA).
Also worse than a GIC ladder, which will get 2.2 or so at the cost of liquidity.
I think the advice "if you want to hold bonds, hold short-term ones rather than long-term ones" is not bad.
The bigger issue is: Why don't more 'brokers' and 'financial advisors' discuss the advantages of GICs etc?
Seems to me that for many Joe Average investors, whether they are in accumulation or withdrawal phases, there is no need for the liquidity of bonds, so why pay for it?
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Re: 10 Questions for John Bogle

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DavidR wrote: Seems to me that for many Joe Average investors, whether they are in accumulation or withdrawal phases, there is no need for the liquidity of bonds, so why pay for it?
True for Joe Average. But if you're a business or an institution, the limit on deposit insurance is much too low to be of much use. Short-term bonds are the only way to get a government guarantee.

Bonds are also useful as collateral, GICs not so much. Again, probably doresn't affect people on this forum -- I'm just explaining why there is a demand for short term government bonds, even though they are yielding about 1% nominal.

George
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Re: 10 Questions for John Bogle

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ghariton wrote:I'm just explaining why there is a demand for short term government bonds, even though they are yielding about 1% nominal.
Presumably that 1% nominal yield is a confirmation of the degree of such demand.

Does any discount broker offer a service that automatically rolls over maturing GICs?

Something alone these lines: The client sets the ladder/rung criteria, e.g. 3 rungs, 1, 2 and 3 years. As each rung matures the broker buys a new 3-yr GIC from the highest-paying institution. The client might also be able to specify CDIC-only (vs. credit union) and that they're willing to accept a lower rate if they're already maxed out insurance-wise with the highest-paying institution.

AFAIK discount brokers get a 25bp commission from the issuer so they've got an incentive to offer something like this.
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Re: 10 Questions for John Bogle

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Bylo Selhi wrote:Something alone these lines: The client sets the ladder/rung criteria, e.g. 3 rungs, 1, 2 and 3 years. As each rung matures the broker buys a new 3-yr GIC from the highest-paying institution. The client might also be able to specify CDIC-only (vs. credit union) and that they're willing to accept a lower rate if they're already maxed out insurance-wise with the highest-paying institution.
IMHO if a client needs this kind of hand-holding, they shouldn't be at a discount broker. It could also lead to higher costs, disputes, etc. OTOH if discount brokers figure it could bring in enough new money, maybe we should expect to see it soon, similar to RBCDI practice accounts, BMO AdviceDirect, etc.
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Re: 10 Questions for John Bogle

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IMHO if a client needs something like this, they shouldn't be at a discount broker.
Yep. Don't know about the others, but it only takes a few seconds to scroll through the RBCDI offerings to find a renewal option.
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Re: 10 Questions for John Bogle

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My point is that some people buy ST bond ETFs/funds because of convenience compared to running a ST bond ladder. My idea would provide convenience with some additional revenue opportunity for the broker, especially compared to ETFs.

On reflection I suppose that could be construed as advice. Perhaps that issue can be addressed by instead notifying the client as a rung matures and including in the notification a list of potential replacement rungs.

When I ran a small business we sometimes rolled T-bills every 30 to 60 days. I'd get a courtesy call or e-mail from their fixed income people before each maturity to remind me to give them renewal instructions. I found that very convenient.
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Re: 10 Questions for John Bogle

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Perhaps i should have used the term 'fixed income' rather than bonds or etf's in my last post. While the discussion of whether to use etf's or GiC's or bonds, etc, is useful, in the context of this thread I posted this mostly to indicate McKeoug's preference for stocks over fixed income in this particular environment. Although, as I say, I appreciate the discussion on the types of fixed income, his point, and perhaps I fogged it up a bit, is in today's world--forget fixed income and go for stocks.
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Re: 10 Questions for John Bogle

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That ignores the 'risk control' function of fixed income.
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Re: 10 Questions for John Bogle

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Shakespeare wrote:That ignores the 'risk control' function of fixed income.
Well, I don't know if he ignores it. He is aware of it. He says that those who can't sleep at night, because of their portfolio, should get some. But, for himself, and those who can afford to take a risk because of pensions, etc., and who can sleep at night, he thinks ( perhaps I misrepresent him here but I hope not) that there is more risk of losing money in fixed income today. He believes, as many do, that stocks, while more volatile than fixed income, will provide a much better return, especially with todays rates. Whether you believe that or not and are willing to act on it is the question.
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Re: 10 Questions for John Bogle

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That's not what you posted earlier.
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Re: 10 Questions for John Bogle

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The bigger issue is: Why don't more 'brokers' and 'financial advisors' discuss the advantages of GICs etc?
Any advisor I've talked to wants to discuss the GIC's I hold but only to sell them and buy more stocks.
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Re: 10 Questions for John Bogle

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Shakespeare wrote:That's not what you posted earlier.
Sorry about that. I posted this because I thought it was just following along with the earlier discussion.
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Re: 10 Questions for John Bogle

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Today's interview with Jack Bogle on CNBC.
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Re: 10 Questions for John Bogle

Post by Shine »

[quoteToday's interview with Jack Bogle on CNBC.]

I mean no offense to Mr Bogle however, the video/article suggests that of the $120 Billion pulled out of active funds approximately $30 Billion has been moved into ETF funds. What about the other $90 Billion, or 75% of funds pulled from active management - to where did that move? Any data on that?

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Re: 10 Questions for John Bogle

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Shine wrote:of the $120 Billion pulled out of active funds approximately $30 Billion has been moved into ETF funds. What about the other $90 Billion, or 75% of funds pulled from active management - to where did that move? Any data on that?
Perhaps conventional open-end index funds. In the US, unlike in Canada, the MERs on such funds, especially at Vanguard, are competitive with ETFs. Yet they provide for no-fee investment/redemption and all the administrative, educational, planning, etc. services a fundco like Vanguard can offer retail investors.
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