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A Gem-"The Battle for the Soul of Capitalism"
Taylor Larimore 10-02-2005, 8:56 PM | Post #156470 | 
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Hi Diehards:
In the hospital, and while recovering from a Laryngectomy (loss of voice) operation, I received a package. It was a note from Jack Bogle accompanied by his new book, "The Battle for the Soul of Capitalism." The note and book made my recovery easier. I would like to share excerpts with you:

Dedicated to his twelve grandchildren: "My generation has left America with much to be set right; you have the opportunity of a lifetime to fix what has been broken."

About Burton Malkiel, author of 'Random Walk Down Wall Street': "I've known Burt since he joined our Vanguard board of directors in 1977, where he has served with distinction ever since. He is the very paradigm of intelligence, experience, objectivity, independence, and even passion."

"The total pay of the average CEO soared from 42 times that of the average worker in 1980 to 280 times in 2004."

"Our imperial chief executives, with all their fame, their jet planes, their perquisites, their pension plans, their club dues, their Park Avenue apartments, appear to have forgotten that they are employees of the corporation's owners."

"The fixed price stock option is fundamentally flawed as a method of aligning the interest of ownership and management."

"Our traditional gatekeepers--corporate directors, auditors, the financial community, and regulators and legislators--failed to protect the owners against overreaching managers."

"The change from traditional owners' capitalism to the new managers' capitalism is at the heart of what went wrong in corporate America."

"During 1997-2002 alone, the total revenues paid by investors to investment banking and brokerage firms exceeded $1 trillion."

"The scandals that were initially publicized in the press were but a small tip of the giant iceberg that represents the enormous price paid by investors as the industry moved away from stewardship -- to salesmanship."

"Through the miracle of compounding, those who owned stocks in 1982, and still hold them today, had multiplied their capital more than 16 times."

"The past is history, the future's a mystery."

"Since the crash, some 1,570 publicly owned firms have restated their earlier (inaccurate) financial statements."

"It is widely understood that the earnings that corporations report to the IRS are almost invariable lower than the earning they report to shareholders."

"It is the board that is charged with holding management responsible to represent the interests of the shareholders."

"No mutual fund firm, pension manager, bank, or insurance company has ever sponsored a proxy resolution that was opposed by the board of directors or management."

"The value of a corporation is neither more nor less than the discounted value of its future cash flow."

"The rise of the defined contribution plan played a major role in the growth of the mutual fund industry."

"Instutional investors now own 66% of all U.S. equities."

"In April 2002, N.Y Attorney General, Eliot Spitzer brought an inforcement action involving serious conflicts of interest. -- The ten largest banking firms (including others) agreed to cough up a stunning $1.4 billon."

"When we have strong managers, weak directors, and passive owners, don't be surprised when the looting begins."

"Some 60% of corporate employees, for example, report that they have observed violatons of law or company policy at their firms."

"Traits such as character, integrity, enthusiasm, conviction, and passion are every bit as important to a firm's success as precise measurements."

"It remains virtually impossible for shareholders to nominate their own candidates for director." (Several years ago Diehards nominated Mel Lindauer as a Vanguard director.)

"In mutual funds, those 95 million direct owners have no individual power, but awesome collective power."

"The mutual fund industry played a major role in the failure of investment America to observe its ownership responsibilities."

"The average turnover of stocks leaped from a remarkable stable annual rate of roughly 15%--to 100% or more since the late 1990s."

"In mutual funds, alas, the past is all too rarely prologue."

"Index funds are the quintessential long-term investors."

"Over the past decade the low-turnover quartile of equity mutual funds provided a risk-adjusted annual return of 11.6%, outpacing the the 8.8% return of the high-turnover quartile."

"Of 1,028 stock recommendations made by the typical brokerage firm during the first quarter of 2001 (the peak if the bull market), only 7 were "sell" recommendations."

"There are two eternal factors that explain equity returns: (1) economics, and (2) emotions."

"GM, Ford, and Delta have pension assets (nearly $200 billion for the three firms combined) many time their corporate assets (just $60 billion)."

"Over 1,800 hedge funds have folded their tents from 1995 to 2003."

"Dividends remind us that 'cash is king' and plays a major part in the creation of long-term returns."

"Short-term speculation is costly folly and long-term investing is priceless wi

Originally posted in thread: 44411
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