The Clash of the Cultures Quotes

“For finally, “you can always count on Americans to do the right thing,” as Churchill pointed out, “but only after they’ve tried everything else.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“The most important of these rules is the first one: the eternal law of reversion to the mean (RTM) in the financial markets.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs; costs that ultimately overwhelm that magic.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“In the mutual fund industry, for example, the annual rate of portfolio turnover for the average actively managed equity fund runs to almost 100 percent, ranging from a hardly minimal 25 percent for the lowest turnover quintile to an astonishing 230 percent for the highest quintile. (The turnover of all-stock-market index funds is about 7 percent.)”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“some estimates suggest that the failure rate is around 20 percent, meaning that each year, one of every five hedge funds goes up in smoke.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“In 1950, individual investors held 92 percent of U.S. stocks and institutional investors held 8 percent. The roles have flipped, with institutions, now holding 70 percent, predominating, and individuals, now holding 30 percent, playing a secondary role. Simply put, these institutional agents now collectively hold firm voting control over Corporate America. (I”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“For example, trading in S&P 500-linked futures totaled more than $60 trillion(!) in 2011, five times the S&P 500 Index total market capitalization of $12.5 trillion. We also have credit default swaps, which are essentially bets on whether a corporation can meet the interest payments on its bonds. These credit default swaps alone had a notional value of $33 trillion. Add to this total a slew of other derivatives, whose notional value as 2012 began totaled a cool $708 trillion. By contrast, for what it’s worth, the aggregate capitalization of the world’s stock and bond markets is about $150 trillion, less than one-fourth as much. Is this a great financial system . . . or what!”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“Pressed to identify useful financial innovations created during the past quarter-century, Paul A. Volcker, former Federal Reserve Chairman and recent chairman of President Obama’s Economic Recovery Board, could single out only one: “The ATM.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“Over the short run, however, the fundamentals are often overwhelmed by the deafening noise of speculation—the price at which the stock market values each dollar of earnings.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“they pale by comparison to the trading volumes of hedge funds, to say nothing of the levels of trading in exotic securities such as interest rate swaps, collateralized debt obligations, derivatives such as futures on commodities, stock indexes, stocks, and even bets on whether a given company will go into bankruptcy (credit default swaps). The aggregate nominal value of these instruments, as I noted in Chapter 1, now exceeds $700 trillion.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“But after all the horse trading between Democrats and Republicans—and reformers, bankers, and lobbyists—I fear that its complex, obtuse regulations (some 170 separate rules are still being developed) involved in limiting proprietary trading by banks makes me wish we’d taken the simple step of restoring the separation of deposit taking banks from investment banks. The Glass-Steagall Act of 1933 worked well until it was gradually eroded and finally repealed in 1999.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“But most short-term renters of stocks are not particularly interested in assuring that corporate governance is focused on placing the interests of the stockholder first.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“As a result, Keynes warned, the stock market would become “a battle of wits to anticipate the basis of conventional valuation a few months hence, rather than the prospective yield of an investment over a long term of years.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“Even for taxable clients, mutual fund managers supervised the assets in very much the same way, simply ignoring the tax impact and passing the tax liability through to largely unsuspecting fund shareholders.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“Financial markets are far too complex to isolate any single variable with ease, as if conducting a scientific experiment. The record is utterly bereft of evidence that definitive predictions of short-term fluctuations in stock prices can be made with consistent accuracy. The prices of common stocks are evanescent and illusory.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“The creation of Vanguard and its truly mutual (fund-shareholder-owned) structure has been the so-far-single counterexample to this pattern. I explain why this structure has worked so well, and why it must ultimately become the dominant structure in the industry.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“In recent years, annual trading in stocks—necessarily creating, by reason of the transaction costs involved, negative value for traders—averaged some $33 trillion. But capital formation—that is, directing fresh investment capital to its highest and best uses, such as new businesses, new technology, medical breakthroughs, and modern plant and equipment for existing business—averaged some $250 billion. Put another way, speculation represented about 99.2 percent of the activities of our equity market system, with capital formation accounting for 0.8 percent.”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation

“In the short run, the stock market is a voting machine; in the long run it is a weighing machine. —Benjamin Graham, Security Analysis (1934)”
― John C. Bogle, The Clash of the Cultures: Investment vs. Speculation