John Bogle and Vanguard democratized capitalism
Top line in this morning’s WI State Journal is news that the indentured servants at Blaska Stately Manor may have to take in laundry, shovel snow, and hold cookie sales.
Pensions for those invested in the Wisconsin Retirement System (WRS) may decline 0.5%. The horror! Actually, that’s more of a trim than a shave — a $103 nick for the average Wisconsin government retiree. Per year.
Even so, government exchequers should take notice. It is a nick that hits 203,000 annuitants. Do you know how many of those live in Madison and Dane County? I don’t either. But we’re guessing a lot of voters.
Which is why I told the Madison teachers union they should not complain about their 4.1% total compensation increase in their current contract. Retirees took a shave and a haircut, not a trim, after the 2000-09 Great Recession.
The WRS is taking this trim in response to Wall Street. Dow Jones Industrials are down 5.6% for the year. Which should tell you that the state retirement system lives on pure, unadulterated Capitalism. That the trim is small is due to the retirement system’s five-year smoothing process. The market could soar next year but the WRS payouts will not. Prudence and Patience.
Bogle heads buy and hold
Which leads us to Jack Bogle, who died this past week at the age of 89. He founded Vanguard mutual funds and helped America take stock in America.
His great insight in 1976 was the broad, stock market index fund. It simply followed the 500 largest stock companies as measured by Standard & Poor. (Always thought that an unfortunate name for a financial firm.) No high-priced gurus studying entrails and arcane computer models — just follow the market, up or down but mostly up because of the American economy and that capitalist thing. Buy and hold was Bogle’s philosophy.
He also set up Vanguard as a true mutual fund — not just funds held mutually but fund-holders who owned the company. Like a cooperative. Helped keep costs low, which was another of his trademarks. Like Henry Ford put an automobile within reach of the common man. Like Sam Walton of Walmart and Herb Kelleher of Southwest Airlines, more recently.
That allowed individual investors to get into the market on their own, not dependent on their employers, for as little as $3,000.
Democratized the markets
Which is what your Squire did when he left The Capital Times with his rollover in 1991 and he is glad he did. We chose Vanguard among all the providers after intensive study and a dart board.
Even state government encourages its employees to contribute more of their salary — beyond their required WRS retirement contribution — for additional exposure to stocks and bonds. Which we did, big time. We are glad we did.
So revered was Mr. Bogle that a cult of “Bogleheads” snapped up his books like hungry piranha, traveled to conferences at which he spoke like Greatful Deadheads.
“Unlike anybody else in the financial industry, Bogle said what he was thinking, on the record, The way most investment firms threatened their clients was “shameful.” Most mutual funds’ annual expenses were “larcenous,.” The attempt to beat the market was “a fool’s game.”
We’ll close with Jason Zweig’s assessment in the Wall Street Journal of a man every free marketer should know and love:
American investors have lost the fiercest advocate they may have ever had.
Blaska’s Bottom Line: Forget free college, subsidized housing, or cheap bus passes. If we were forced to give away One Free Stuff: it would be ten grand in a Vanguard S&P 500 fund, unredeemable for 10 years, follow the fund’s reports, learn some economics and the discipline of delayed gratification.
Call it the Cure for Alexandria Ocasio-Cortez.