The Clash of the Cultures: Investment vs. Speculation

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During the course of his sixty-one year career, mutual fundpioneer and Vanguard Group founder John C. Bogle has seen enormousexpansion and remarkable change in the financial sector of the U.S.economy. In his tenth book, The Clash of the Cultures:Investment vs. Speculation, he brings his considerable wisdomand experience to bear on the most troubling developments of therecent era—the crowding out of long-term investment byshort-term speculation.

During Bogle's career in the ...

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During the course of his sixty-one year career, mutual fundpioneer and Vanguard Group founder John C. Bogle has seen enormousexpansion and remarkable change in the financial sector of the U.S.economy. In his tenth book, The Clash of the Cultures:Investment vs. Speculation, he brings his considerable wisdomand experience to bear on the most troubling developments of therecent era—the crowding out of long-term investment byshort-term speculation.

During Bogle's career in the investment profession, he'switnessed a change in the very nature of our financial system, andnot for the better. Our aggressive culture of destructive andcostly speculation has come to dominate the earlier prudent cultureof investment. To the detriment of our society, the idea ofstewardship has gotten lost in the shuffle, replaced bysalesmanship and innovations that have ill-served investors.

Far more than being a mere eyewitness to the last six decades offinancial history, Bogle has been one of its most activeparticipants. The many first-hand experiences he recounts includethe creation of the first index fund and the creation of the firstexchange-traded fund; and his critical role in the rise, the fall,and the renaissance of Wellington Fund, a real-world case study ofthe clash between investment and speculation. He sheds new light onthe dramatic change in the culture of the mutual fund industry, themultiple ways in which speculation has invaded our retirementsystem, and the need for a federal standard of fiduciary duty.

Insightful and instructive, the book paints an alarming pictureof how the financial world has moved away from a culture focused onvalue-adding long-term investment towards a value-destroyingculture of rampant speculation—and the inevitable clash ofthese two cultures brought about by this transformation. Bogleconcludes his book by outlining ten simple investment rules to helpinvestors avoid the many hazards of investing and, by focusing onsimplicity and economy, to meet their investment goals.

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Editorial Reviews

From the Publisher
The Clash of the Cultures: Investment vs.Speculation”   is a must read for investors whowant to understand the forces that are working against them andwhat they can do about it to maximize their investment returns. Itshould come as no surprise to those who know Jack and hisphilosophy that the final words of his final book are: ‘Stay the course!’—Forbes

The Clash of the Cultures: Investment vs.Speculation is . . . an enjoyable read that ends with 10lessons for investors that, while simple, are deeply valuable tothe general public. . . Clash of the Cultures is a greatsummary of the breadth of Bogle's 60-plus years in the investmentfield. He offers observations on the shocking change in the cultureof finance that he has witnessed first-hand. Among the mostimportant of the shifts is that short-term speculation has crowdedout long-term investment. Though this has been great for thefinancial sector, it has come at the expense of the public.”—CBS MoneyWatch

“Bogle, as the Godfather of index investing, has ideasthat are timeless and based on simple math, and at the same timeexhibit uncommon sense and a routinely overlooked view of howinvestors are consistently overcharged by the financial servicesindustry. Fortunately, his wisdom is widely available to everyone.Much of that wisdom has been assembled in Bogle's most recent bookThe Clash of the Cultures: Investment vs. Speculation(Wiley, 2012). While most of the insights are time-honored themesin the Bogle canon, they are very useful for individualinvestors.” —Reuters

“Bogle's latest book tackles what looks like an artificialdistinction. His Clash of the Cultures title conjuresthoughts of world war and social strife. But he's talking about‘investment vs. speculation’. . .  As inhis previous books, Bogle is a master of the clear point and thepithy quote - from the investment writings of John Maynard Keynesand Benjamin Graham, pension adviser Keith Ambachtsheer and Bogle'sold mentor the late Walter L. Morgan, as well as the Gospels ofLuke and John.”—Philadelphia Inquirer

“You know what to expect when opening a book by John Bogle,founder of the Vanguard mutual fund group and inventor of indexfunds: a lament about the fall from grace of the US mutual fundindustry, and a restatement of his strong conviction that COSTSMATTER!!!  Mr Bogle’s new book, The Clash of theCultures , Investment vs Speculation, does notdisappoint on either count, but it is also very much in tune withthe zeitgeist in its focus on stewardship and fiduciary duty. It lambasts US mutual fund managers for neglecting to act asresponsible owners of the companies they invest in on behalf of thesavers whose money they look after, and for their own governancefailures.”—The Financial Times

“[The Clash of the Cultures] echoes many familiar . . .themes worth repeating, because they are too often ignored.Investors spend so much time chasing hot asset classes and hot fundmanagers that they end up buying high and selling low, all thewhile incurring transaction costs. In Mr Bogle’s words,‘investors need to understand not only the magic ofcompounding long-term returns, but the tyranny of compoundingcosts.’ . . . The American pension-fund industry has beenparticularly bad at understanding these long-run fundamentals. Manyschemes assume, on the basis of past performance, a return of7.5-8%, a figure that is highly implausible given the current lowyields. . . Meanwhile, many employees in the private sector havebeen switched into defined-contribution schemes. . .  Butemployees are not saving enough, are not allocating theirportfolios efficiently and are incurring too many costs. It is hardto disagree with Mr Bogle that the ‘system of retirementsecurity is imperilled, heading for a serious train wreck.’But will anybody listen to him, when they haven’t in thepast?” —The Economist

“John Bogle’s latest book, as much a piece of historyas is it a playbook for how to repair financial markets scarred bytwo bear markets in 10 years and a loss of confidence, is one ofthose books on finance that ought not be left unread. The Clashof the Cultures is the latest and perhaps best book by thefounder of Vanguard Group. . . Plus, for those not familiar withBogle’s prose, the man can turn a phrase, which makes thebook all the more enjoyable.”—IndexUniverse

“If the Occupy Wall Street movement is serious abouthelping people with real financial issues, then its leaders shouldread John Bogle’s book and embrace his ideas forchange.”—Rick Ferri,

“John Bogle’s story is an oft-told tale, yet evenBogle junkies will learn some fascinating new facts from The Clashof the Cultures. Bogle takes of the cudgels on behalf of investors,who he believes have been poorly served by most of the industry.Bogle brings invaluable historical perspective to current issuesranging from high-frequency trading to the looming crisis in theU.S. retirement system to the use of mutual fund investors’money to promote the growth of assets under management. Everythoughtful investor can benefit from his wisdom, served up withrefreshing modesty by a giant in a field notorious for outsizedegos.” —Financial Analysts Journal

“The book is a gem. Well-researched and carefully argued,there's simply no way to argue with Bogle's premises — that thelittle guy always loses, that the more you churn the more you lose,that most people's retirements are dramatically underfunded, thatmanagement looks out for itself and not the stockholders, and thatgreed is driving the bus. . . Read Bogle, not just to learn abouthow to protect your investments and understand what really happenson Wall Street. But more than that, read The Clash Of TheCultures and declare yourself into the three percent whohave ideas and aren't afraid to use them.” —TheHuffington Post

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Product Details

  • ISBN-13: 9781118122778
  • Publisher: Wiley
  • Publication date: 8/7/2012
  • Edition number: 1
  • Pages: 353
  • Sales rank: 174,539
  • Product dimensions: 6.30 (w) x 9.10 (h) x 1.30 (d)

Meet the Author

John C. Bogle is the founder of the Vanguard Group ofmutual funds and President of its Bogle Financial Markets ResearchCenter. He created Vanguard in 1974 and served as chairman andchief executive officer until 1996 and senior chairman until 2000.In 1999, Fortune magazine named Mr. Bogle as one of the four"Investment Giants" of the twentieth century. In 2004, Timemagazine named him one of "the world's 100 most powerful andinfluential people," and Institutional Investor presentedhim with its Lifetime Achievement Award. In 2010, Forbesmagazine described him as the person who "has done more good forinvestors than any other financier of the past century." In January2012, some of the nation's most respected financial leaderscelebrated his distinguished career at the John C. Bogle LegacyForum, held at New York's Museum of American Finance.

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Table of Contents

Foreword By Arthur Levitt ix

Acknowledgments xiii

About This Book xv

Chapter 1 The Clash of the Cultures 1

Chapter 2 The Double-Agency Society and the Happy Conspiracy29

Chapter 3 The Silence of the Funds: Why Mutual Funds Must SpeakOut on the Governance of Our Nation’s Corporations 65

Chapter 4 The “Mutual” FundCulture—Stewardship Gives Way to Salesmanship 103

Chapter 5 Are Fund Managers True Fiduciaries?: The“Stewardship Quotient” 139

Chapter 6 The Index Fund: The Rise of the Fortress of Long-TermInvesting and Its Challenge

from Short-Term Speculation 167

Chapter 7 America’s Retirement System: Too MuchSpeculation, Too Little Investment 213

Chapter 8 The Rise, the Fall, and the Renaissance of WellingtonFund: A Case Study—Investment

Wins, Speculation Loses 251

Chapter 9 Ten Simple Rules for Investors and a Warning forSpeculators 297

Appendix I: Performance Ranking of Major Mutual FundManagers–March 2012 323

Appendix II: Annual Performance of Common Stock Funds versusS&P 500, 1945–1975 325

Appendix III: Growth in Index Funds—Number and Assets,1976–2012 327

Appendix IV: Wellington Fund Record, 1929–2012 329

Appendix V: Wellington Fund Equity Ratio and Risk Exposure(Beta), 1929–2012 333

Appendix VI: Wellington Fund Performance versus Average BalancedFund, 1929–2012 335

Appendix VII: Wellington Fund Expense Ratios, 1966–2011337

Index 339

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Customer Reviews

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Sort by: Showing all of 2 Customer Reviews
  • Anonymous

    Posted September 23, 2012

    Very Solid Read.

    Like all Mr. Bogles books...straightforward and to the point. Whats wrong with the current financial indusrty and how to fix it.

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted September 20, 2012

    No text was provided for this review.

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