Bogleheads

[SoonerSunDevil]

http://www.bloomberg.com/apps/....refer=home

I never thought I'd hear a 78-year old man use the term orgy...

``We should have never let ourselves get into this position where so many dollars are being held by foreign countries and bought by foreign countries that are enemies,'' Bogle said today in an interview with Bloomberg Television.

``It's hard to think of Russia or China, or North Korea or Iraq as our friends,'' Bogle, 78, said. ``Friend or enemy, they have a lot of control over what happens here,'' he said.

[Wagnerjb]

[SoonerSunDevil]

Andy,

I agree with the points you raised, and I too respectfully disagree with Mr. Bogle. His comments sound protectionist and are very opposed to the basic principles of free markets and capitalism. I don't know why he feels this way, and I'm puzzled as to why this appears to be bothering him so much.

Best,

John

[bob u.]

Well said, gentlemen. His comments don't sound protectionist. They are protectionist.

That's all we need now. A fortress America mentality that discourages foreign direct investment. What a solution to our current situation! Sheez. Bob U.

[Joe S]

I have no opinion on these funds, but maybe Bogle is old enough to remember Hitler and Stalin and questions whether it would have been good for the US to have them owning part of our economy in the 1940s.
That may be a bad analogy re our current enemies, real or perceived, and maybe in some way it actually makes them less of an enemy, but it does give one pause. In any case, I do agree with Buffet - given current policies, what can we expect?
BTW, do you people who label opposition to investment by foreign countries as protectionist think that the federal government should buy stocks to finance SS?

[Murray Boyd]

I think most of the top economists who support zero tariffs are for capital controls to manage volatility. You can be for free trade AND also know that losing control of your own economy is big trouble. Look at Argentina, Brazil, etc. But that's not even what Bogle and Buffet are getting at it. It's the deficits that have caused this. That's the issue.

Free trade is good because on balance it's better than the alternatives. It's not the holy gospel or a mathematical proof. At its best any ideology is still only a shortcut or an approximation of the best answer.

[Peanut]

I am sorry but I have to disagree with most of these responses. I believe Mr. Bogle is correct on this issue.

I am all about free trade and market capitalism and believe the foreign economies do help and support our economy.

But the point we are missing here is that North Korea, China, and Venezuela for example are not our friends, they are our enemies. I don't believe people realize how bad it is and how much they wish harm on us. As a soldier that has been overseas I have seen first hand the intensity and fervor in which people that dislike the U.S. display it. They truly want to ruin us and destroy us. For whatever reason they believe in, the U.S. is target number one.

I am all for foreign allies of the U.S. having a free run at our markets, hoping they have no malice intended against us, but countries that let it be known they dislike us and wish harm upon us, yes we need to be careful how much influence they have here. They definitely do not have our best interests at heart, they have exactly the opposite at heart.

Once again, I am not saying none of you on this board have ever not been overseas or do not have friends from those countries or even have not served your country overseas before as I am sure some of you have. But in my personal experience, it is scary out there how many people dislike us and how they train with one goal in mind, to destroy us. And I was even suprised at peoples sentiment in some of the neutral countries I was in. I believe some poeple would be suprised at how a lot of foreigners view us Americans oversesas. Not to say that a lot of poeple do not like us and appreciate what we do, but just that there are a lot out there that do not.

People need to realize that there is a real threat out there, it is not made up to scare the American public, and they are smart about how they try to attack/infiltrate the Unites States. It is not always a brazen attack out in the open but more often than not it is the subtle attack that we do not see as these people have immense dedication and passion and are willing to take a large amount of time to accomplish thier goals, the fall or suffering of the U.S.

Thanks for letting me rant a little about this topic.

-Peanut
_________________
"One hundred men will test today, but only three, win the..."

[rob]

[Rose21]

Well Warren can't bail everybody out.

[PaPaw]

I recently read John Bogle's book, "The Soul of Capitalism". I think the points he was making about our enemies buying heavily in the US, likely consistent with their desires to put the US down a peg or two, are similar to the points he made in his book. His book includes concerns about greed on Wall Street, brokers, most mutual fund owners and greedy investors. In short, I believe John Bogle is a patriot and is just pointing out what he considers to be significant risks to the future health of our great country. I do tend to agree with him. The naysayers may wish to read his book before discounting his perspectives in the Bloomberg article as the article was very brief. I also strongly believe everyone has a right to their opinion and I'm not putting anyone down who thinks the Bogle article was protectionist and not on the mark.

Just my two cents worth.

[Barry Barnitz]

Keep in mind that Mr.Bogle is not referring to private investment in the US economy but by state directed investment through state-owned Sovereign Wealth Funds. There is a wide range of opinion regarding these investment pools. A sample of opinion:

Larry Summers
Richard Posner
Tim Swanson (Mises Institute)
Councl on Foreign Relations
International Monetary Fund

News articles:
The Economist
International Herald Tribune
The New Yorker

regards,
_________________

blb
December Birthday Celebration: Ludwig van Beethoven

[magellan]

[nisiprius]

Didn't it send at least a small shiver down your spine when you heard that The Boeing Company lost that big Air Force tanker contract to a bunch of cheese-eating surrender monkeys and hoity-toity Limey nancy-boys?

I recall a time when it almost seemed as if the Air Force handed out contracts to Boeing, Douglas, and Lockheed based on whichever one of them seemed to need it the most at that particular moment... as if they believed that it was in the national interest to keep all the big aircraft companies healthy.
_________________
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

[learning]

I think it's more prudent than protectionist to create guidelines on sovereign wealth fund investing.

Private investment is motivated by profit.

Sovereign wealth fund investing may or may not be.

When an investment has the potential to be a tool of foreign policy, and not just investment policy, appropriate safeguards should be put in place.

This, in my opinion, is a healthy debate to have, not to be dismissed out of hand as anti-free trade.

[bob u.]

What's good for the goose is good for the gander. If you start shutting out foreign direct investment, you're issuing an invitation to other countries to kick U.S. investment out.

My god! What's all this yammering about dividing equity into a 50/50 global portfolio. Hello: do you understand the meaning and consequences of an anti-globalization stance?

By the way, Buffett has a position in Brazil--a country he identifies as supporting the dollar. Here's an interview. http://seekingalpha.com/articl....ilian-real

Since when have we Americans been fearful of competition? Bob U.

[pastafarian]

[grumel]

Of course there is also the option to cut military expenditure. This would also reduce the foreign trade deficit. But guess thats no options, cause in that case the "opponents" military budget could exceed 10% of the US Military Budget which is indiscutable.

Indeed, everyone should be afraid that China and Russia prosper, chances are high they become democracies. And who should be blamed then for all the bad things ?

Increasing economic relations with not so friendly staates alignes the interests of both countries. Unlikely there will ever be mechanic solidarity between China and the US, but theres already a lot organic solidarity. More is not bad. Its kind of logical that huge amounth of foreign investments make the investors more interested that a country prospers.

[learning]

[quote="bob u."]What's good for the goose is good for the gander. If you start shutting out foreign direct investment, you're issuing an invitation to other countries to kick U.S. investment [b]out[/b].

My god! What's all this yammering about dividing equity into a 50/50 global portfolio. Hello: do you understand the meaning and consequences of an anti-globalization stance?...

Since when have we Americans been fearful of competition? Bob U.[/quote]

Hi Bob U,

I would agree that foreign investment flows are important. Global growth depends on it. And, as you say, what's good for the goose is good for the gander.

Still, I think a useful distinction is made between private investment flows and sovereign investment flows.

The distinction is important, in my opinion, because the motivations behind each can be quite different.

Private capital is put at risk only if it is expected to return a profit.

Sovereign capital is put at risk to:

1. return a profit.

2. Or potentially to further the foreign policy objectives of the sovereign state. Investment in this instance is "foreign policy by other means."

I'm not saying that all sovereign capital investment does this -- or will do this.

And I'm certainly not saying that sovereign capital investment should be shut out.

But surely it does make a difference whether an investor is a private individual, or say the Sovereign State of Russia.

One look at how Russia is using its natural gas supplies to influence government policy in Eastern Europe is enough to at least raise the question about the role of investment dollars in Sovereign wealth funds.

In my opinions, global guidelines do need to be developed which take into account the unique nature of the Sovereign investor, and allow all to see that no mischief is taking place.

Absent that, patchwork legislation by governments around the world will impede, rather than encourge the growth of sovereign capital investment.

Repectfully,

Learning

[Peanut]

Very well put Learning, you make an excellent point. Safeguards should definitely be put in place to protect the United States as we are never sure of what somones motives may or may not be. Like I stated before, there are people out there that wish harm on the United States and are willing to take the time and resources to achieve that goal in many different ways.
_________________
"One hundred men will test today, but only three, win the..."

[frose2]

I find it curious that sovereign wealth funds exist. It would seem to me more prudent to keep the oil in the ground if you don't really need to spend the money you would obtain by selling it.

On the other hand, maybe if you're a Gulf shiekdom that wants to keep more of its oil in the ground as the price rises, you might be afraid of the US invading you.

I can also see why individual citizens of the Gulf states would want to have a refuge somewhere far away from their fragile and exposed native countries.

[Index Fan]

I would think that one would want free trade and foreign investment for every country- if everyone has a big stake in everyone else's economic health- for self-interested reasons- there would most likely be a lot less wars.
_________________
"Optimum est pati quod emendare non possis."
-Seneca

[grumel]

[bob u.]

Learning--

We're not that far apart. Norway is an exemplary instance of a sovereign wealth fund--they are transparent. Singapore may be headed in that direction, and I find nothing threatening about their investments.

The KIA (Kuwait Investment Authority) has been in business for a long time. Much less transparency, but little evidence of evil intentions. My home university has recently signed a long-term exchange agreement with Dubai--entirely upfront and likely to pay off for both parties in many ways. Were I younger, I'd love to be involved.

I think part of the problem, frankly, is American nativism. Judging from the number of passports issued per capita, we are not a population of folks who travel the world. We are inherently suspicious of cultures we've never interacted with.

I'm truly grateful that my family and my job enabled me to live in a number of countries. I'm very much an American, but I'm very comfortable visiting and living in other countries. Bob U.

[Rookie]

Years a go, it was not easy for the Chinese to own shares of Morgan Stanley. However, the Chinese took advantage when the market was down to inject $5.7 billion into the company last December without any big news.

http://www.nytimes.com/2007/12....mp;emc=rss

Another thing:
The Chinese are waiting, and buying the down small American and European companies just to get the technology of know-how. When there is no support from the governments, these companies have no choice but to sell their companies to whoever want to buy them. It's about survival.

It's the business that they want from the United States. But they hate the US. In their education systems, some countries put "imperialism" before United States in the textbooks. Kids grow up that way. It's their subconsciousness. In their minds, United States is bad no matter what.

One quote I heard before: Do not believe in what they say, but watch carefully what they do.

[heyyou]

Please consider that some governments have leaders that have far different intentions than the parents of the kids who become soldiers for those countries.

If we had a smaller national debt, we would have a stronger dollar, so "them furriners" would be buying a smaller slice of our economy while we were buying a larger piece of theirs. Paying for a war with our national debt credit card instead of raising taxes is the problem. If we focussed on energy efficiency, we could reduce our foreign oil spending so there would be fewer foreign-owned dollars needing to be invested somewhere. Simple solutions that are very difficult to implement. Think what it would take to get "big oil" to take a pay cut, or for people to give up displaying their income by driving larger vehicles. Declaring war on fuel consumption would be a positive direction for this country.

[Montie]

I am a bit taken a back that so few people have bothered to articulate the potential harm caused by sovereign wealth funds. People throw around loaded terms like "foreign control." However, if you really think that sovereign wealth funds are harmful, you need to articulate a sensible mechanism by which the cause harm. For example:

1) If a sovereign wealth fund invests in a diversified portfolio of US corporations, what real harm can it do? I suppose that it could dump those shares all at once and cause the market to drop. However, the drop would be most likely end once the sovereign wealth fund ran out of shares to sell. Moreover, the biggest loser in this scenario would be the sovereign wealth fund itself...as it sells shares at deflated prices.

2) If a sovereign wealth fund invests in a large stake (but non-controlling) stake in a US corporation, what real harm can it do? I suppose that it might be able to gain access to management to attempt to steal technological and national security secrets. However, wouldn't be much more cost effective (and less conspicuous) for the foreign government to buy off a few managers engineers at the corporation?

3) If a sovereign wealth fund buys a controlling stake, I suppose that real harm could exist. However, I believe that there are already some laws currently on the books to deal with these situaitons. (These might need to be updated.) Moreover, the Federal government has broad powers to freeze assets in case where they suspect potential issues.

Overall, it seems highly unlikely that sovereign wealth funds represent a threat.[/i]

[justaworker2]

There is no difference in Soverign Wealth Funds or a George Soros...In fact, George Soros might be worse for America. Mr. Bogle is right on.

[learning]

[quote="bob u."]Learning--

We're not that far apart. Norway is an exemplary instance of a sovereign wealth fund--they are transparent. Singapore may be headed in that direction, and I find nothing threatening about their investments.

The KIA (Kuwait Investment Authority) has been in business for a long time. Much less transparency, but little evidence of evil intentions. My home university has recently signed a long-term exchange agreement with Dubai--entirely upfront and likely to pay off for both parties in many ways. Were I younger, I'd love to be involved.

I think part of the problem, frankly, is American nativism. Judging from the number of passports issued per capita, we are not a population of folks who travel the world. We are inherently suspicious of cultures we've never interacted with.

I'm truly grateful that my family and my job enabled me to live in a number of countries. I'm very much an American, but I'm very comfortable visiting and living in other countries. Bob U.[/quote]



Hi BobU,

I agree our positions are very close.

Your distinction between Sovereign Wealth Funds is a good one, in my opinion. Norway’s openness and transparency, is a good model for others to follow.

On the issue of American nativism, I agree it exists. But I draw a distinction more brightly than you may agree with.

It is the distinction between people and government.

One may admire another country’s people - their literature, their music, their food – more broadly, their culture – but find the policies of their government to be at odds with American interests.

This is not a fear of foreign cultures, or fear of what lies outside American borders, but a clear-sighted recognition that there exist governments whose policies are hostile to the United States.

More foreign travel does not solve this, unfortunately.

The question then is: With respect to Sovereign Wealth Funds, what is the proper policy response to be?

The American government’s position – as articulated by Treasury Secretary Paulson – seems to strike the right note, in my humble opinion: Encourage the free flow of capital from Sovereign Wealth Funds, while ensuring that global guidelines are in place that allow for uniform transparency and openness.

This is something the IMF is wrestling with right now, with limited success. (See http:www.ny.times.com/2008/02/09business/09sovereign.html?scp=1&sq=weisman&nyt)

So far, many Sovereign Wealth Funds have not yet put these guidelines in place – but should.

Respectfully,

Learning

[EmergDoc]

[Peanut]

Once again, very well put Learning.
-Peanut
_________________
"One hundred men will test today, but only three, win the..."

[frose2]

[robertts12]

U.S. is in a bad economic situation and should not choose the investors. The main "enemies" that create this crisis are the bank managers and the fanatic home buyers ... yes, guys.
did you really hear about a foreign state fund that is an enemy? I heard only about countries that are friends, Abu Dabi and Kuwait, if my memory is working corrctly.

[dumbmoney]

[frose2]

[bob u.]

Hi again Learning:

I believe Abu Dhabi has arrived at some sort of transparency agreement with Secretary Paulson and other Western countries. It's a step in the right direction.

By the way, here's a link to the agreement I previously mentioned between Michigan State and Dubai. Were I not retired, I would jump at the chance to get involved. http://uaeinteract.com/docs/Mi..../27644.htm

Bob U.

[schwarm]

[Ria Rhodes]

OUJohnNasr:

"I never thought I'd hear a 78-year old man use the term orgy..."

I see your emoticon, so I guess you say this partly in jest. Funny how most younger people think seniors drop-off the radar screen when it comes to sex (almost a pun in there with different spelling). The only real difference between a young swinger and a senior, is the senior has more experience with matters of the heart/mind/body. Ever hear of Hefner?

[learning]

Hi BobU,

Thank you for the link. I can understand why you would want to participate.
I think there are few things as exciting -- and as important to human progress -- as the free exchange of ideas.

I agree, also: It seems quite a bit of progress has been made this past week on Sovereign Wealth Funds.

Learning

[bob u.]

Well, I've waited about a week to see if the moderators of this site would respond to Emergdocs's response to the clear slurs made about the Brits and the French.

Either the comment about the French and British has slipped by the fine-meshed net of moderation, or possibly this site has no problem with nativism of the worst sort.

If you're gonna advocate global investment, develop some respect for people from other countries and, even better, try travelling out of your comfort zone. Bob U.

[Chas]