I added a new post on the WSJ Bogle opinion piece. This opinion piece from a legendary mutual fund founder says you can no longer trust money managers, including mutual fund managers, since they are all part of an institutional-cabal in-bed with corporate managements too. The inside-the-industry founder and author says this institutional-cabal is attracting investment dollars and exploiting underlying companies and investors for personal conflict-of-interest gains. I agree with this highly-regarded industry-insider on these points. But the obvious conclusion is the reverse of what he suggests. Active investors should escalate rather than decrease their trend to take self-directed control of more of their investments, rather than trusting â who the author says are untrustworthy â mutual fund managers and other investment managers. Here is where I also strongly disagree with the author and mutual fund founder. Mr. Bogle calls on financial reform and higher taxes â huge government intervention â to fix these long-embedded problems. I donât think government intervention on this massive a scale is appropriate and I donât think it would work. Plus there would be many unintended consequences. During this fragile recovery for investors, this is not a time to punish self-directed investors â who have a right to distrust managers - with higher capital gains taxes and a speculator and market-maker killing financial-transaction tax. Such a tax would leave investors with no choice but to trust non-trustworthy managers in the eyes of Mr. Bogle. By the way, I disagree and think that many managers are highly-reputable and trustworthy too. This article also should be read with a grain of salt. Mr. Bogle has a full court effort underway in the media to attack self-direct trading, in my view because that huge trend has taken lots of revenue away from his mutual fund empire. Mutual funds have taken it on the chin with weak performance and the recession is hurting them even more. Is Mr. Bogleâs media campaign really a marketing campaign in disguise? If mutual funds can be trusted to deliver excellent performance in the marketplace â and he just said they can not be â then why does Mr. Bogle argue for tax increases on self-directed investors, to un-level the playing field even more with his mutual fund investor clients? Mutual fund clients already have embedded tax advantages over self-directed investors and that should be enough of a tax-edge. To compete better, how about earning trust improving performance? With the meltdown on Wall Street, government attacks on Wall Street, and now this mutual fund-insider airing dirty laundry behind the scenes, is it any wonder why more and more investors donât want to take control of their self-directed investments and trade out of risk more frequently? Say no to higher taxes on investors of all stripes and no to an industry killing financial-transaction tax. All that would be left are buy and hold mutual funds and the marketplace and investors demand much more.
Bogle interview with Claman - typical. nothing new. wants increased frictional costs. didn't harp on transaction tax. only quick mention of a nickle a share tax then moved on.
Excellent phrasing. Good theme to center on for future Bogle rants. That would make for a good headline for an article.
http://www.politico.com/politico44/ A group of Democratic lawmakers will meet with Vice President Joe Biden on Tuesday to discuss creating a bipartisan debt commission that will tackle the nation's growing fiscal troubles. Attendees include House (bitch) Nancy Pelosi (D-Calif.), House Majority Leader Steny Hoyer (D-MD.), Rep. John Spratt (D-SC), Rep. David Obey (D-Wis.), Rep. Charlie Rangel (D-NY), Se. Harry Reid (D-Nev.), Sen. Dick Durbin (D-IL), Sen. Max Baucus (D-Mont.), Sen. Kent Conrad (D-ND), and Sen. Daniel Inouye (D-Hawaii). The meeting will start at 5pm at the White House. I'm hoping that this commission is not formed. I had read some previous posts that indicated that this commission would look at ways to reduce the deficit, that would include the proposal of a financial transaction tax, and that Republicans would possibly be inclined to go along with it if they were able to get some things in return.
Yeah hopefully this commission is never formed but I just can't see the Republicans going along with a TT no matter what. I wonder what would be so valuable that they would get in return? -Guru P.S. We all know a TT would not be a revenue generator after all variables are taken in consideration.
from 12/29/09: Democrats are candid, at least in private, about the kind of the deal they have mind this time around. Democrats would agree to means-test entitlements, which means that middle and upper-middle class (i.e., GOP) voters would get less than they were promised in return for a lifetime of payroll taxes. Democrats would also agree to cut appropriations by two or three percentage points and live under pay-as-you-go budget rulesâthe same rules Democrats promised to live by in 2006 but have since violated routinely. In return, Republicans would agree to an increase in the top income tax rate to as high as 49% and in addition to a new energy tax, a stock transaction tax, or value-added tax. http://online.wsj.com/article/SB10001424052748703939404574566034074899214.html
Yeah, this is the story I was referring to. I would think the idea of them agreeing to a transaction tax is very slim, so long as this bank tax/fee proposal of Obama's goes through without a problem. If it doesn't, then we should all be 'very' concerned.
I think a VAT is more likely in the US than a transacton tax. If they can't pass Obama's bank tax I don't see how they could possibly pass a TT. This bank tax proposal is going to be part of the fiscal 2011 budget therefore they can do a budget reconciliation vote to pass it (51 votes in Senate). -Guru
So we finally see what's inside. If you have access to any non-self-published media, then PM me now, because I've taken some time to write a brief critique of his assumptions. Essentially, they are very weak indeed. In fact the emperor has barely any clothes on. If media should by any chance pick up on his lack of substance, it could cost him his credibility as a (former) economist. So here's an executive summary of his assumptions (the article has 2-3 pages and is non-scientific but extensively researched, well enough for the FT or WSJ if you can find a name to brand it with Baker assumed that: 1) UK Stamp Duty revenues can be scaled up to the U.S. case using market volume differences (which is legitimate, it has been done before, even though his number is 3 times higher than estimates previously published in the literature and my own calculation based on a 2004 Institute for Fiscal Studies report), 2) current market volume would not change (remaining 'static') - a very optimistic assumption, given the widely observed sensitivity of the trading volume to any increases in transactions costs, 3) derivatives would account for the lion's share (80%) of the tax revenues - extremely unrealistic (given the Swedish derivatives market destruction with a tax rate 10 times lower than the 0.02% proposed in the US for derivatives). So the conclusion is that "If at least some of the above inconvenient details are duly taken into account by Mr. Baker, his revenue estimate may become much less optimistic than the $150 billion figure so widely quoted by the press. As shown above, the most conservative lower bound of such projections can be as low as $2-4 billion (even including derivatives), and that's not counting revenue lost from the existing capital gains tax."
If the Tea Party wins with the Republicans winning the MA senate seat, that will send shock waves. No new taxes across the board. California-style proposition Democracy with voters turning on a dime in elections, nationwide with Tea Party help. CA can't pass tax increases or spending cuts with proposition-style truly representative democracy. They always are the canaries in our coal mine. We may return to few tax increases, spending constraints at best, and having to grow our way out of the deficit. I truly believe that tax increases come from supply side economic growth and not breaking the tipping point with new tax increases. We are at a tipping point now in my view. Certainly, spending is more out of control and that should be reined in first, before significant tax increases. The Democrats are like a kid in a candy shop, way out of control with discussions on VAT, cap and tax, surcharges on the rich, investment taxes, the financial-transaction tax and much more. First cut spending. Let's get back on track with regime change first. That starts with no 60 Senate Democratic super-majority first and continued shock waves for the midterms. Another Democrat commission for the budget fix stacked with group-think Democrats only? No way. Go Scott Brown! And once we have regime change, I hope they unwind (or not enact) that bank tax too! We don't want anyone to take a government poison. It was the best of all evils in our view concerning the financial-transaction tax, but we don't want our fellow traders on Wall Street to be hit up either - providing the transaction tax is fully defeated too. Remember the Bush years; we did not have to tremble every time Belgium spoke for the EU. Go dollar and let the EU implode a little over Greece and more. Who made them the poster boy for tax laws anyway? They can take their VAT and cap and tax and you know what...