In the Company of Greatness

This morning I awoke to front page tributes in the Wall Street Journal and the New York Times commemorating the life of an extraordinary man: Jack Bogle. Like his wife, Eve, and their children, I mourn the loss of a giant.

Strange bedfellows we were. Jack the father of indexing and I an active manager. After reading The Battle for the Soul of Capitalism (2007), I sent the book to each board member with very specific instructions on what to read. A company in which my firm had a large stake that was comporting itself in ways that were precisely the reasons why Jack wrote the book. Our friendship/mentorship grew out of that first encounter. Later, when The Man in the Arena (2013) was published, the author, Knut Rostad, included my tribute to the man I so admired. Even in his passing these words seem fitting to speak again.

Words from Those Who Know Bogle Best

Frank K. Martin, investment adviser; founder, Martin Capital Management; author of A Decade of Delusions

If there’s one word that explains the popularity of Jack Bogle’s books and his iconic status among investors worldwide—including those purveyors of advice in the investment industry who scorn him publicly while admiring him privately—it’s integrity. As a personal friend, as well as a disciple, I have been a first-hand witness as this trait of character manifests itself in all that Bogle says and does. The word integrity is often applied where it doesn’t fit and hasn’t been earned, which makes it all the more fitting in this instance. How is it that integrity has become synonymous with the persona of Jack Bogle? As another remarkable and courageous man, German theologian Dietrich Bonhoeffer, observed, one can often find the significant in the trivial.

“Jack Bogle Does Not Write to His Legions of Followers from a Gilded Cage. He Writes As One of Them.”

In 1974, Bogle made what at the time might have seemed like an inconsequential decision. As founder of the Vanguard Group, he decided that it should be organized as a “mutual” fund, owned by its investors, to whom the fund’s profits would flow through lower costs. While he could not have known at the time the exact opportunity cost of his decision, he surely knew it would be huge. He had seen the handiwork of Edward Johnson II, who founded rival family-owned Fidelity Investments in 1946. His multi-billionaire heirs rank high on the Forbes list of the wealthiest Americans. By contrast, Mr. Bogle says his own wealth is in the “low double-digit millions.” “Most of it is in Vanguard and Wellington mutual funds in which he invested via payroll deduction during his long career,” according to a recent New York Times article.

In a world inclined to measure success in dollar terms, Jack Bogle would not even warrant honorable mention. And yet he has achieved his iconic status among tens of millions of investors while most men of wealth from the financial sector, save, perhaps, for a few like his friend Warren Buffett, have discovered something that money won’t buy.

Because of that crucial decision made years ago, Jack Bogle does not write to his legions of followers from a gilded cage. He writes as one of them, as their equal, as a man who has walked in their shoes. Their fears are his fears, their realities his realities. One, after all, cannot be king and subject at the same time. One must make a choice. Jack Bogle made that decision almost 40 years ago, quoting Justice Harlan Fiske Stone: “Most of the mistakes and major faults of the financial era that has just drawn to a close will be ascribed to the failure to observe the fiduciary principle, the precept as old as holy writ, that `a man cannot serve two masters’.”

Having read all of Jack Bogle’s books, circulating my favorites among friends and family far and wide, it is his priceless integrity and incorruptible motives thus revealed that have long inspired me. As Charlie Munger likes to say, and I paraphrase, tell me a man’s motives and I’ll tell you the outcome. Jack Bogle’s motives are unimpeachably transparent, making his honesty and candor all the more appealing. He says what he means, and means what he says. In the end, Jack Bogle’s books contain a wealth of insights for investors from a man who has always been able to see the forest while most only see the trees. The subliminal message that percolates up through each book is the story of the life of Jack Bogle, the tireless champion of what is right and true, of what it means to live a life of integrity.

His book Clash of Cultures, like The Battle for the Soul of Capitalism and Enough before it, challenges conventional wisdom and offers a tried-and-true way of thinking as an antidote for present-day ills. One reads Jack Bogle’s books much like Bogle himself relishes the biographies of his hero Teddy Roosevelt: there is something quite redeeming in reading the works of great men.

In memory of my friend and mentor,

Frank K. Martin

Reflections On Cash As An Option

We keynoted our first blog post on May 31, 2017 with an inauspicious title, An Enterprising Thought: Cash Is an Option. From that point, the S&P 500 continued its seemingly endless advance, finishing the year up 10.8%. In May, the two-year treasury was yielding a middling 2.2%. Ever since the Great Recession, cash has been a dirty word. As a result, money flowed into every other asset class, with equities being the best-performing over the last 10 years.

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‘Tell Me What I Wanna Hear’

Paraphrasing a refreshingly perceptive Ben Sasse, first-term senator from Nebraska: Those of us in the investment management profession know people who appear to sincerely want our advice, but then resist when we tell them something they don’t want to hear. In all candor, I must admit to being on the receiving end as well. I have rejected sound advice from time to time, and I suspect you have too.[i] Such is the result of bias. 

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Hitting the Pause Button

Just two words uttered by Fed Chairman Jerome Powell during a mid-day speech on Wednesday, November 28 sent the S&P up 2.3% by the close. The S&P 500 went on to notch an overall 2.8% gain for the week—despite lingering uncertainty surrounding the G-20 Saturday, December 1 dinner meeting between Presidents Donald Trump and Xi Jinping on the ever-mercurial Sino-American trade war. Continue reading “Hitting the Pause Button”

‘… Looks a Lot Like Elkhart, Indiana’

Our July 16, 2018, post “The Future of America’s Economy …” began with the phrase that headlined a Wall Street Journal feature on April 13. The Journal characterized Elkhart thusly: “From Bust to Boomtown: Life in a Comeback City.” The Midwestern city has risen from the ignominy of being singled out as having the nation’s highest unemployment rate of 22% in 2009 to having one of the lowest in 2018 at 2.7% in May of this year.

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Productivity Growth II: Can the U.S. Economy Stay Airborne Without It?

In our last post we alluded to the possibility that the technology-driven Fourth Industrial Revolution, for which many economists hope, will not be a panacea for enhancing productivity, in contrast to with earlier U.S. post-1870 industrial revolutions. Moreover, we addressed a complex structural factor, the slowing rate of increase in educational attainment, that insidiously depresses productivity growth. Continue reading “Productivity Growth II: Can the U.S. Economy Stay Airborne Without It?”

Productivity Growth I: Can the U.S. Economy Stay Airborne Without It?

In our September 21st post, “Whatever It Takes,” we examined today’s low growth in productivity,[1] which has accounted for about 50% of the substandard growth rate in GDP since the Great Recession of a decade ago.[2] During his September 2018 speech at the annual Jackson Hole Symposium, Fed Chairman Jerome Powell offered some optimism in his hope for a “Fourth Industrial Revolution.” This is a common refrain that assumes the next several decades will see advances in 3-D printing, autonomous vehicles, robots, artificial intelligence, and robotics that will rekindle productivity growth.

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The Fed on Unemployment and the Future

There are some mixed signals coming from the Fed regarding unemployment.

This week Chairman Powell said, regarding FOMC projections from its September 26 meeting, that “From the standpoint of our dual mandate, this is a remarkable positive outlook…Since the 1950s, the U.S. economy has experienced periods of low, stable inflation and periods of very low unemployment, but never both for such an extended time as is seen in these forecasts.

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