The Associated Press, January 18, 2012
John Bogle, inventor of index funds, counted himself among the 1 percent of wealthiest Americans a couple decades ago. You might not guess that today, when you hear the founder of mutual fund company Vanguard rail against economic equality. It has been 15 years since the low cost investing pioneer stepped down as CEO of Vanguard. It was Bogle who launched the first index mutual fund in 1975. Vanguard Group has since grown into the largest fund company, managing nearly $1.7 trillion in U.S. fund assets.
Bogle remains wealthy, but his income is a fraction of what he earned when he ran Vanguard. He is far from retired, now 82, and is in the office every day. He’s also writing his 10th book, The Clash of Cultures: Investment vs. Speculation and continues to deliver speeches.
Below are several questions and answers from a recent interview with Bogle:
Q: What do you think about the discussion over tax fairness?
A: “I believe the rich should pay more but that’s not a good platform for tax policy. What has gone wrong is that we’ve failed to recognize the difference between earned and unearned income. Is it really fair for gamblers on Wall Street to pay a 15 percent tax rate when they make a winning investment?”
Q: What’s your take on the Occupy movement?
A: “I’m happy to say that my current income puts me in the 99 percent group. So maybe I’m not so happy, I don’t know. This movement has brought to the surface some very serious problems in our country about disparities in opportunity and income. So many young people are having a terrible time getting a job”. He goes on to say, “The negative side is that they just pushed too hard for too long. It’s very difficult for any movement without any seeming leadership to have any sense of taste or judgment. In some places, it’s just gone on too long, and it’s been too disruptive”.
Q: What’s the focus of the book you’re writing?
A: “That our financial system has gone off the rails. It’s something we think of as providing capital for new businesses, that we will enable people to finance new companies or add to the capital of existing companies.” Bogle believes we need a transfer tax on trading which will help tame the trading and speculative element in our financial system.
Q: What’s your investment outlook heading into 2012?
A: “If you’re investing in stocks with the idea of a one-year outcome, you should not invest. If you invest in stocks with a five-year outlook, I would think it is highly debatable if you should do that. You have to consider the consequences for your savings, and whether you’d be decimated.
Bogle is very cautious considering the current economy and doesn’t expect a boom in consumer spending over the next two or three years.
Comment: It’s obvious Bogle has been burned and regrets his part in the failed economy. I find his comments interesting and probably as you, agree with some of his points and disagree with others. He makes a distinction between how earned and unearned income should be taxed. The debate will go on as to the definition as to what income is earned and what income is unearned. Many consider investment earnings as unearned of which I would disagree.
By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics
RSS & Email Subcriptions
Facebook
Twitter
LinkedIn