John Bogle, the founder of Vanguard, has published a new book called Enough. True Measures of Money, Business, and Life … download the first chapter here… he writes…
~~~~ “The rules under which our system works — which I call, after Justice Louis Brandeis, “ The Relentless Rules of Humble Arithmetic ” — are ironclad:
- The gross return generated in the financial markets, minus the costs of the financial system, equals the net return actually delivered to investors.
- Thus, as long as our financial system delivers to our investors in the aggregate whatever returns our stock and bond markets are generous enough to deliver, but only after the costs of financial intermediation are deducted (i.e., forever), the ability of our citizens to accumulate savings for retirement will continue to be seriously undermined by the enormous costs of the system itself.
- The more the financial system takes, the less the investor makes.
- The investor feeds at the bottom of what is today the tremendously costly food chain of investing.
The essential truth, then, that sums up each of these inarguable points: On balance, the financial system subtracts value from our society.” ~~~~
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