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At a time of volatility and anxiety in financial markets Americans put their trust in Vanguard Funds. Vanguard funds took in 40% of the entire cash flow of the mutual fund industry in the first half of 2012, $87.7 billion went to Vanguard excluding money market funds. This was largely because of the index funds which Vanguard originated and which were Bogle's invention. Today Bogle, 83, still speaks up for investors and investing for the long run, on staying away from speculation and protecting U.S. financial markets from speculative behaviours. He says the financial industry has to put investor and client interests first, with no excuses made for behaviour, period, at a time when the financial industry has lost its compass and direction. Bogle heads the research center at Vanguard Funds following disagreements with his hand picked successor Brennan, and leaving the Board in 1999. The current head at Vanguard Funds, CEO McNabb, says Vanguard owes its success to all the foundations set by Bogle. Bogle says strategy follows structure, and the structure he built of investor ownership of Vanguard Funds prevents a situation where owners can siphon off funds, or engage in activities that would hurt investors. Bogle's differences with Brennan came from his efforts to institutionalize other ideas such as investing for the long term, and shunning frequent trading which could happen with the creation of exchange traded funds (ETF's). Bogle has had several heart operations since 1999, and a successful heart transplant. This has not slowed his adocacy efforts on behalf of investors, with 11 books on investing and safeguarding financial markets from excesses of the kind seen in the 2008 financial crisis. The most recent book is "The Clash of Cultures: Investment vs. Speculation" (Wiley & Sons, $29.95). In the book he calls for a grass roots effort by investors to protect America's retirement system, and finances of younger parents with children to send to college, from the damage that is happening with the financial system in acute stage of dysfunction. ...

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The story of the Vanguard 500 Index Fund's founding in 1976, and the inspiration from Nobel Laureate economist Paul Samuelson, is told by founder John Bogle. On August 31, 1976, the first index mutual fund, First Index Investment Trust was born. It was launched by Bogle at Vanguard. The idea he put forth was that passive index management could outperform active management with its fees, load, commission and other costs. The IPO target was $150 million, but the underwiritng resulted only in $11.3 million. The underwriters suggested cancelling the deal, saying that this was not enough to own all 500 stocks in the S&P 500 Index. Bogle's response was just the opposite- he now had the world's first index mutual fund. Here Bogle talks about the early inspiration. His senior thesis at Priceton University in 1951, in which Bogle broached the idea that mutual funds could not say they were superior to market averages, received support from Samuelson. This was followed by the article 23 years later by Samuelson in "Challenge to Judgement," an article in the Journal of Portfolio Management in summer 1974, that stated: "that some large foundation set up an in-house portfolio that tracks the S&P 500 Index." Bogle took up the challenge and offered well diversified funds at minimal costs, with a focus on the long term investment. Writing in Newsweek in August 1976, Samuelson said that his prayer had been answered. Bogle describes how his inital encounter working with Samuelson's "Economics: An Introductory Analysis," was difficult. He barely made a C-. In 1993 Samuelson offered to write the foreword on Bogle's first book- "Bogle on Mutual Funds." The relationship lasted 61 years!...

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Letters from John Bogle of Vanguard who faults excessive leveraging for the crisis, Bernie Sanders of Vermont, and others on the failures of Wall Street and investment banking firms.

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Jason Zweig interviews John Bogle, founder of the Vanguard Group, in September 2011, after weeks of extreme volatility in the U.S. stock market. He says the index fund concept has been "bastardized" by exchange traded funds and the speculative behaviour in ETF's with insane turnovers approaching 10,000 percent. He considers investing in a balanced portfolio of stocks and bonds a useful way to approach investing even though the last decade has produced medicore results. And predicts a 7% return for the next decade, with money doubling every 10 years. The changes today mean you have to start earlier, save and invest for longer periods, says Bogle, but the returns should still be good. It would be insane to expect the high returns of the 70's and 80's today, says Bogle. In today's market Bogle has 80% of his investments in bonds and 20% in stocks.

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Mr Bogle of Vanguard Group, says we live in an agency society, not an ownership society. Ownership society was 50 years ago. The mutual fund managers and the pension fund managers make the decisions as institutional investors for us, they are agents. And these managers had the power as corporate citizens, controlling some 70% of the shares of public companies, but decided to exercize forbearance. They did not play the active role they could have played in board structure and governance, director elections, executive compensation. Money managers did not do the kind of due diligence that was required. The securities analysts and researchers could have, but failed to question the toxic assets on the balance sheets of banks, investment banks and especially of places like Citigroup and Merrill.

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 WSJ interviews Burton Malkiel 50 years after Malkiel published "A Random Walk on Wall Street," putting forward the efficient market hypothesis. That hypothesis he says is till more true than ever, that the market senses information and reflects what that information says in the stock price. This means one would do better than active investors by investing in an index that reflected the broader stock market with a wide ranging basket of stocks that reflected it. By 1974 Vanguard's Bogle started the first index fund for passive investing. It did not gain support till 2 decades later, yet today half of all US investing is in index funds. Malkiel supports the index fund investment and says equities play an important role even in retirement, and says the next decade will give returns closer to 5-6% for equities. He says the important thing is not fancy shots just hitting the ball back, not making mistakes. 

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The May 6 episode of the stock market plunge of 900 points in the U.S. and then recovering had the effect of rattling investors nerves especially retirees. The impact of this episode is recorded in the experience of one Charles Schwab broker office in Englewood, Colorado. By the end of that day this broker had 50 calls on his answering machine from a fifth of his clients, all seeking to know what happened. Charles Schwab, who helped launch a period of individual investing in the U.S. after 1982 by cutting fees and going after the average investor, (along with others like Jack Bogle of Vanguard Funds), is also on edge. He says he has not seen anything like this since his early days. Schwab confirms Yale Prof. Shiller who says (see link) that his index for markets shows a lot of nervousness. Saying that 98% of people are still very concerned, coming after the May 6 incident, and the Greece and eurozone crisis that impacted US stock markets. One other factor he points out is the constant flow of headlines that suggest certain business people engaged in fradulent practices, something that fuels a lack of trust. Charles Schwab ponders from his office across the San Francisco Bay Bridge, whether words like safety and soundness mean anything anymore. Another factor of concern, Bogle points out, is that institutional investors now own 70% of American corporations, up from 35% in 1975. And the advantage has veered sharply in their direction as institutions, hedge funds, and investment banks trade on their own account, with wealth moving in that direction. This leaves the individual investor and especially the retiree or those about to retire in a severe predicament....

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David Kostin, Goldman Sach's U.S. equity strategist and his prediction of the S&P 500 at 1250 at the end of 2012. The S&P was at 1421 on April 1, 2012, the highest it has been since May 20, 2008. In his research note Kostin says that over the longer term the stock market will offer opportunities after a more normal growth environment is reestablished. This is similiar to the view held by John Bogle, founder of Vanguard. For the short term- the 2012-2013 time frame Kostin sees tactical risks, and results below average. The reason he gives is low economic growth and the large degree of uncertainty. The situation in Europe shows slowing to no growth and more deficit problems, and the sanctions on Iran pose risks for oil prices.

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The Volcker rule is named after former chairman of the Federal Reserve, now 82 year old Paul Volcker. In its complete form it would ban banks from investing in trading activities. But with Treasury Secretary Geithner and economic advisor Summers being part of the team that supported deregulation in banking, the Volcker rule was put in a diluted form in the proposed financial reform bill. Only after it was supported by financial leaders with long years of experience, such as John Bogle, Nicholas Brady and William Donaldson, and with active participation by Volcker, did the Volcker rule in a modified form get the support of Congress and the White House. What grade does it get from Paul Volcker? A B not even a B+ says Volcker. Volcker regrets his earlier silence on this issue. His view is that there is a sense of nervousness about the long term, and this is justified. He says a lot will depend on a 10 member regulatory council that is created by the bill, and all depends on how tough and vigilant it is on a day to day basis with the banks. Analysts share Volcker's concern about "the certain circularity in this businesss," where things are going well for some time followed by another crisis. Volcker's concern is that the bill doesn't prevent bank's from getting into activities such as investing in hedge funds and other similiar activities....

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As the final Republican tax bill is debated in Congress on December 19, 2017, Senator Bob Casey cited the following points from the Joint Committee on Taxation Report on the floor of the Senate.  1. Americans building their hopes that their pay checks in February 2018 will be increasing are in for a big disappointment said Senator Ron Wyden of Oregon, a senior member of the Finance Committee. The Joint Committee on Taxation estimate is that for the 57 million families making less than 100,000 dollars a year the tax cuts in the Republican legislation will either not reduce their taxes or reduce the taxes by about $100 a year. 2. The bill does little for the big tasks facing America of rebuilding failing infrastructure. Senator Casey cited 4500 bridges needing repair or replacement in Pennsylvania alone. It also does little for health care access for middle class families and is likely to lead to 10% increase in health care premiums. Affordability of college and other hurdles of middle class and working class families remain unaddressed.   3. The $9 billion in the estate tax cuts would finance the Children's Health Insurance program which has expired.  4. The $36 billion in tax cuts for corporations comes at a time when corporate profits are at the highest they have been in 15 years, according to Vanguard founder Bogle. He also points out that wages as a percentage of GDP are the lowest in 15 years. The tax cuts in the Republican bill are not likely to correct this imbalance.  5. The share of GDP of people making more than one million dollars in 1980 was 11%, this is up now in 2017 to 20%. This has led to questions about the wisdom of these tax cuts which disproportionately benefit a very small percentage of Americans who do not need these tax cuts, and come with significant sacrifices for the middle class in terms of what is available in public services, and the cost to their children as infrastructure and access to health and education is made more distant because of a growing U.S. debt from this tax cut. The big problem then with this bill is that it further damages intergenerational mobility in the U.S., undermining the foundation of a democratic society. Damage has already happened in the past three decades as Federal Reserve chairman Janet Yellen pointed out at a conference on Economic Opportunity and Inequality on Oct. 17, 2014, saying-"The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression." This is why there is substantial agreement in the media from the Wall Street Journal's Greg Ip to Krugman in the New York Times that the bill fails to correct a harmful trend, and goes further in the wrong direction for a democratic society.       ...

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This Washington Post analysis of the Republican tax bill gives an exceptional view of the bill's impact and provisions. This is the first major change to the tax laws since 1986. The size of the bill is $1.5 trillion, with the Joint Committe on Taxation projection that the bill will increase tax revenues over a decade by $500 billion, meaning that it will cost $1 trillion being added to the deficit. What the bill does: 1. It offers a permanent tax cut to corporations by reducing the corporate tax rate to 21 percent from 35 percent. Industries benefiting the most are mining, real estate, technology, manufacturing. 2. The individual tax cuts expire in 2025. They are skewed to disproportionately help highest income Americans, much less lower income Americans and much more highest income Americans compared to high income Americans. In this sense it is skewed in a an unusual way to the highest earning Americans- a sort of Trump effect in place. The top 1% get a tax break of $51,140 in 2019, middle income people earning about $100,000 get about $1000 a year in 2019, tax payers earning around $50,000 about $380, and those earning less than $25,000 about $60 a year in 2019. Taxpayers earning about 150,000 get about $2000 a year tax cut. (Tax Policy Center) 3. The basic assumption is that tax cuts are revenue neutral if there is economic growth and most of that growth comes from corporations investing in growth. The problem as Greg Ip points out in the Wall Street Journal is that countries trying thsi approach in the past such as Britain have not seen such growth materialize. Corporate profits are the highest in 15 years as percentage of GDP, according to Vanguard founder Bogle, and are now 20% of GDP compared 11% in 1980. If corporations did not invest with this level of profits how much additional investment is going to happen, ask critics, especially as demand drives growth and wages are not boosted under this plan.  4.  Because the bill's changes to current law makes it likely that 13 million less Americans will be insured over a decade- from fewer people signing up for Medicaid and on exchanges for Affordable Care Act- it will hurt lower income Americans. Skewing at both ends of the income spectrum of this type is rare in American history particularly in the twentieth century after the Depression of the 1930's, and poses risks for social cohesion, making it unpopular with most Americans. A CBS News poll taken Dec 3-5 shows 53% of all Americans opposed, only 35% support the tax bill just passed in Congress.  5. Then why did Republicans do this? Republicans needed a legislative success after failure to repeal the Obama Affordable Care law. This pressure led to passage with Republicans probably aware that this is temporary tax reform requiring a real effort by both parties working together after the midterm elections in 2018 and as the presidential election approaches in 2019.    ...

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Burton Malkiel on the role of index funds in a well diversified investor portfolio.

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Surging investor interest in passively managed Vanguard index funds. Vanguard's Total Stock Market Index Fund takes the leading position in the mutual fund industry. Assets pass $3 trillion in 2014. Warren Buffett advises his trustee to put 90% of his net worth of $66 billion in very low-cost S&P 500 index fund, suggesting that it be Vanguard's. Vanguard is based in Malvern, Pennsylvania.

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Money shifting out of the PIMCO Total Return Fund as returns from bonds decline in 2012-2013 and this fund returns are a negative 1.2% for 2013, assets under management decline to $247.9 billion by Oct 31, 2013 from $286 billion at the end of 2012. The Vanguard Total Stock Market Index Fund takes first place in size of funds, with returns of 27% in 2013, and $288 billion in assets under management up from $210 billion at the end of 2012. Index funds are increasing in popularity with low costs. This Vanguard Fund has expenses at 4 cents for every $100 invested compared to 46 cents for the PIMCO fund, because the index funds invest in all the stocks in a particular stock index avoiding management fees.

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Vanguard Index funds attracted $233 billion in new investment in 2014, according to Morningstar. Of this $40 billion went into the Vanguard Total Stock Market Index Fund, $27.5 billion into the Vanguard Total Bond Market Index Fund, and $9 billion into the Vanguard Total International Bond Market Index Fund. The poorer returns from actively managed funds with high fees and the PIMCO Total Return Fund led to this shift into index funds. For every $100 in investment with Vanguard index funds the cost in fees is about 18 cents compared to $1.24 in the average actively managed mutual fund, according to Morningstar.

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Daisy Maxey of the WSJ talks to 3 financial advisers during Dec. 2014 about how investors should approach stock market volatility, the U.S. Federal Reserve's plan to raise interest rates, and tax issues in 2015. The advisers say investors should not let the volatility affect a steady long term investing strategy. Joel Isaacson says he prefers high-dividend paying stocks over the 10 year U.S.Treasury bonds because of the lack of much upside in bonds. He adds that taking extra risks on high yield bonds is not warranted. The advisers refer to opportunities in areas which are not doing well in 2014 such as in Europe. On tax issues having some money in Roth IRA's is suggested, to have money in tax deferred as well as tax free accounts. Annuities depend on individual situations.

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European stock markets outperformed the DJIA and the S&P 500 in the U.S. in 2015. Stoxx Europe 600 went up by 7.3%, France's CAC 40 up 9.5%, Germany's DAX up 6.9% excluding dividends. In the early part of the year the DAX went up 20% before being affected by the worries over China and the VW emissions scandal. Italy's FTSE MIB up 13%. Britain's FTSE down 4.45% in 2015 being affected by declines in commodity producers. Experts still see 2016 as a good year for European stock markets, as conditions remain much the same as in 2015 with support from the European Central Bank and eurozone economic recovery in southern Europe.