The Battle for the Soul of Capitalism

I write this after markets closed for the third quarter of 2007. I just heard John Bogle. He’s the big man with the deep voice which sounds like it wants to chuckle. He is noted as an originator in the mutual fund business. Now retired from Vanguard and an author of several books including the one with the title to this piece, he was on Bill Moyers’ Journal. When Mr. Bogle talks, I listen. After all, I’m a really mature senior and I wanted to know whether my few pennies will be safe in Vanguard Funds.
I have a stock fund, advertised as a widows’ and orphans’ investment, which seemed as solid as the Rock of Gibralter. However, a hedge fund started circling around, and so I thought I should look at what Vanguard could do for me. I don’t do day to day charts or tipsters on TV, but it does seem reasonable to pay attention to Alan Greenspan, now that he’s on the author’s circuit. He explained that the latest boom and bust phenomenon in housing was indeed global, and we should think about its significance. He doesn’t make suggestions for what the Federal Reserve should do about it, and he thinks Professor Bernanke is on top of his job. Mr. Greenspan’s cunumbrums and “exuberance” from official days had something to do with my worries. But he didn’t explain exactly what would happen next in boom and bust times, global ones at that. Dr. Bogle seemed to explain it better. The transcript of the interview can be found here:
http://www.pbs.org/moyers/journal/09282007/transcript5.html
Bill Moyers asked him what he thought had happened to make the world of money change and he replied: “Well, it's gotten misshapen because the financial side of the economy is dominating the productive side of the economy.”
He went on to say: “Well, first, it's a national disgrace. Simply put. And there are some things that must be entrusted to government and some things that must be entrusted to private enterprise. And what we see there, at least in my judgment, is that we've taken medical care, healthcare and going from making it a profession in which the patient is the object of the game — preserving the patient "first do no harm" as Hippocrates would say or would have said and turn that into a business. And so, it's a bottom line. I've often said we're in a bottom line society. We're measuring the wrong bottom line.”
I feel better now. I was right! Those raiders didn’t care whether my little stock mutual fund had nice steady positions in the Generals (Motors, Electric, Foods, Dynamics, etc.) which make money every year and pay dividends. I’m not even sure they care what companies are a part of the fund. They tried to trick me. I knew that if long-term, such as 30-year bonds, pays a rate of return around 5 or 6 per cent, then it is skullduggery to believe that this “financial stock” can pay a guaranteed percentage twice that high. They’ll do it but they will be eating up some of my shares. I read it in the fine print. About going into capital! We retirees are very careful about using up the original nut we worked so hard to squirrel away. I’m that kind of capitalist. Not the kind I watched little boys in the Village tell me about shortly after World War II. It was their job to run the numbers for their neighbors. Who won depended on the closing figure of the Dow Jones Industrial Average that day. Come to think of it, it’s ludicrous. Those little boys lived on Bank Street.

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