NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Thought this recent episode of NPR's On Point show would interest some,
https://www.wbur.org/onpoint/2018/12/12 ... john-bogle
https://www.wbur.org/onpoint/2018/12/12 ... john-bogle
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
To give some context, the episode stems from an article by John Bogle that index funds from 3 firms could control more than 50% of the shares of S&P500 companies and thus could control the companies as majority shareholders whenever voting of shares is asked for. So fund managers (or their small committees) would have voting control of these companies.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Don’t worry about it. We shall all be dead a long time before the potential issue of vote concentration Jack Bogle speculated about in his article actually becomes a concern.
Rick Ferri
Rick Ferri
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
I guess the answer to this is Vanguard 1, Vanguard 2, Vanguard 3, Fidelity 1, Fidelity 2, Fidelity 3, Blackrock 1, Blackrock 2, and Blackrock 3. The Teddy Roosevelt solution.
A fool and his money are good for business.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Vanguard already has both a "Vanguard Total Bond Market Index Fund" and a "Vanguard Total Bond Market II Index Fund" (which is what is used in Vanguard's funds-of-funds). I don't know the reason. If your suggestion were followed, I wonder if there would be a Vanguard 2 Total Bond Market, a Vanguard 3 Total Bond Market II...
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
What I mean is break up the companies. Vanguard 1 would stay Vanguard. Vanguard II would be called the Lord Nelson funds. Vanguard 3 would be named the Jack Bogle Funds.nisiprius wrote: ↑Wed Dec 12, 2018 8:32 pmVanguard already has both a "Vanguard Total Bond Market Index Fund" and a "Vanguard Total Bond Market II Index Fund" (which is what is used in Vanguard's funds-of-funds). I don't know the reason. If your suggestion were followed, I wonder if there would be a Vanguard 2 Total Bond Market, a Vanguard 3 Total Bond Market II...
A fool and his money are good for business.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Now I have not heard that one before!nedsaid wrote: ↑Wed Dec 12, 2018 8:33 pmWhat I mean is break up the companies. Vanguard 1 would stay Vanguard. Vanguard II would be called the Lord Nelson funds. Vanguard 3 would be named the Jack Bogle Funds.nisiprius wrote: ↑Wed Dec 12, 2018 8:32 pmVanguard already has both a "Vanguard Total Bond Market Index Fund" and a "Vanguard Total Bond Market II Index Fund" (which is what is used in Vanguard's funds-of-funds). I don't know the reason. If your suggestion were followed, I wonder if there would be a Vanguard 2 Total Bond Market, a Vanguard 3 Total Bond Market II...
John C. Bogle: “Simplicity is the master key to financial success."
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
And Ma Bell, back in the 70's.
Ipsa scientia potestas est. Bacon F.
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
I am having some fun with this. But if public stock ownership is mostly with 3 companies, this would be a problem and break-ups would be the only solution. I think we are a long way from that.abuss368 wrote: ↑Wed Dec 12, 2018 9:42 pmNow I have not heard that one before!nedsaid wrote: ↑Wed Dec 12, 2018 8:33 pmWhat I mean is break up the companies. Vanguard 1 would stay Vanguard. Vanguard II would be called the Lord Nelson funds. Vanguard 3 would be named the Jack Bogle Funds.nisiprius wrote: ↑Wed Dec 12, 2018 8:32 pmVanguard already has both a "Vanguard Total Bond Market Index Fund" and a "Vanguard Total Bond Market II Index Fund" (which is what is used in Vanguard's funds-of-funds). I don't know the reason. If your suggestion were followed, I wonder if there would be a Vanguard 2 Total Bond Market, a Vanguard 3 Total Bond Market II...
A fool and his money are good for business.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
What about just making all shares held by mutual funds disqualified from voting?
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
I do not want my votes to be disqualified. If I don't like how Vanguard is voting proxies, I'll switch to another index fund provider.aristotelian wrote: ↑Thu Dec 13, 2018 10:52 am What about just making all shares held by mutual funds disqualified from voting?
Rick Ferri
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Corporate governance is already severely broken and does not represent the interests of shareholders. Not sure it could get much worse than it is now.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
RickRick Ferri wrote: ↑Thu Dec 13, 2018 12:38 pm
I do not want my votes to be disqualified. If I don't like how Vanguard is voting proxies, I'll switch to another index fund provider.
How do you find how Vanguard is voting its (my) proxies?
Mark
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
In addition to the Vanguard site link, the SEC EDGAR site provides historical proxy votes. The wiki has a page that helps render the somewhat arcane SEC listings more accessible. See ---> Vanguard SEC listings.Rick Ferri wrote: ↑Thu Dec 13, 2018 12:52 pm How Vanguard has voted Proxies:
https://about.vanguard.com/investment-s ... nds-voted/
With SEC filings, mutual fund reportage is aggregated into various groupings. The proxy filings are called N-PX filings in SEC speak. Here for example, are the N-PX filings for Vanguard Index Funds (which includes Vanguard US index funds)---> VANGUARD INDEX FUNDS CIK#: 0000036405.
As you can see, these filings provide a year by year record of proxy votes.
Here is the 2018 proxy filing for the Vanguard Total Stock Market Index Fund.
regards,
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Hi Nisi,nisiprius wrote: ↑Wed Dec 12, 2018 8:32 pmVanguard already has both a "Vanguard Total Bond Market Index Fund" and a "Vanguard Total Bond Market II Index Fund" (which is what is used in Vanguard's funds-of-funds). I don't know the reason. If your suggestion were followed, I wonder if there would be a Vanguard 2 Total Bond Market, a Vanguard 3 Total Bond Market II...
The Vanguard Total Bond Market II Index Fund was created so that the transaction expenses of fund-of-fund rebalancing would be isolated so as not to effect the Vanguard Total Bond Market Index Fund. The direct source is hard to find, but this topic thread, Vanguard Introduces Total Bond Market II Fund may be of assistance.
The following topic includes a quote from a now defunct reuters news release: Target Retirement Bond Index Fund.
The quoted section from the news release:
regards,Vanguard Total Bond Market II Index Fund will only be available for use by Vanguard funds-of-funds and other similar investment products; shares of the new fund will not be available for direct purchase by investors.
Vanguard Total Bond Market Index Fund is the primary bond component of Vanguard`s 11 Target Retirement and four LifeStrategy funds, which regularly rebalance assets among the underlying funds to maintain their respective target asset allocations. Vanguard is introducing the new fund to insulate shareholders of the existing bond market index fund from the potential costs associated with this rebalancing activity.
"It is clear that our funds-of-funds offerings will become increasingly large shareholders of Vanguard Total Bond Market Index Fund. To mitigate the impact of future rebalancing activity on that fund, we believe it is necessary and prudent to introduce a second bond market index fund," said Vanguard Chief Investment Officer George U. Sauter.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Thanks Rick. I agree that Vanguard is voting proxies responsibly.Rick Ferri wrote: ↑Thu Dec 13, 2018 12:52 pm How Vanguard has voted Proxies:
https://about.vanguard.com/investment-s ... nds-voted/
For example, I was tickled to see that Vanguard withheld votes for Facebook board members Sandberg and Zuckerberg.
BlackRock (iShares) voting policy is here:
https://www.blackrock.com/investing/pro ... nformation
I like how this reads too.
Does BlackRock report its proxy votes? My googling didn't turn up anything.
After reviewing these proxy materials, personally I am much less concerned about the Bogle warning for index funds harming the market.
If the funds are voting proxies well, then because of their size it's possible that index funds might improve corporate governance.
At the margin, the market still needs active investors. But how many? Is 10% sufficient? I suspect so.
Mark
The advantage of Get Rich Slow is that you actually Get Rich.
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Explain please, they didn't cast a vote on a measure?MarkVH0518 wrote: ↑Fri Dec 14, 2018 8:46 am
Thanks Rick. I agree that Vanguard is voting proxies responsibly.
For example, I was tickled to see that Vanguard withheld votes for Facebook board members Sandberg and Zuckerberg.
Mark
Never look back unless you are planning to go that way
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Why can't Vanguard simply say "enough"? No more new clients.
What is the point of growing ever larger and larger?
The expense ratios make holding index funds practically free as it is. Doesn't seem like there would be much detriment to existing shareholders.
What is the point of growing ever larger and larger?
The expense ratios make holding index funds practically free as it is. Doesn't seem like there would be much detriment to existing shareholders.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
I don't know the answer to that question.Cycle wrote: ↑Fri Dec 14, 2018 8:58 amExplain please, they didn't cast a vote on a measure?MarkVH0518 wrote: ↑Fri Dec 14, 2018 8:46 am
Thanks Rick. I agree that Vanguard is voting proxies responsibly.
For example, I was tickled to see that Vanguard withheld votes for Facebook board members Sandberg and Zuckerberg.
Mark
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Are you saying why did they withhold votes for board members instead of voting? I checked the 2017 Facebook proxy and "for" and "withhold" are the only options. "Against" is not an option.Cycle wrote: ↑Fri Dec 14, 2018 8:58 amExplain please, they didn't cast a vote on a measure?MarkVH0518 wrote: ↑Fri Dec 14, 2018 8:46 am
Thanks Rick. I agree that Vanguard is voting proxies responsibly.
For example, I was tickled to see that Vanguard withheld votes for Facebook board members Sandberg and Zuckerberg.
Mark
See second to last page:
https://www.sec.gov/Archives/edgar/data ... EB75ED97BC
Given the following:
"Directors will be elected by a plurality of the votes of the shares of our Class A common stock and Class B common stock present in person or represented by proxy at the 2017 Annual Meeting of Stockholders and entitled to vote on the election of directors, which means that the eight nominees receiving the highest number of affirmative votes will be elected",
I'm not sure if it is possible for any of the eight directors to not be re-elected.
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Thanks, I was mostly just interested in the mechanics of it. So did they vote positively for the other directors and only withheld a vote for Cheryl and Mark?
Never look back unless you are planning to go that way
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
I don't think that would change index funds in general holding a ton of voting power in companies. People will just buy from competing index funds if that's what they're looking for.
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Correct! As noted above, withdrawal of director approval is the most negative vote allowed.
It sends a signal even if the immediate, direct impact is limited.
You can see for yourself on page 99 or search for Facebook.
https://about.vanguard.com/investment-s ... 5641175304
To restate, I think Vanguard is voting proxies wisely. Certainly more wisely and consistently than I was ever able to manage.
Mark
The advantage of Get Rich Slow is that you actually Get Rich.
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Why is concentration of votes a bad thing?
Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
The press is gloming on to this because it gives them something else to demonize. "Big Oil", "Big Pharma", and now, "Big Index."
It is by the goodness of God that in our country we have those three unspeakably precious things: freedom of speech, freedom of conscience, and the prudence never to practice either of them. --M. Twain
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Re: NPR On Point: Stock Market Distress Signal: How Low-Cost Index Funds Are Taking Over
Companies (like countries) need to be managed for the long-term, not constantly holding a wet finger in the air to detect what shareholders
(Or voters) want tomorrow.
(Or voters) want tomorrow.
If I was king: once a stock is purchased, you hold it for 30 days.