Yesterday CNBC had a segment about ETFs during its show Power Lunch that started with a snippet from Jack Bogle saying “they’ve corrupted it (ETFs) into a trading business. You can trade all day long in real time, that’s the tag line Tyler (Mathisen), to which I would ask what kind of a nut would want to do that?”
Um, what kind of nut when able to choose, would prefer the more restrictive wrapper, that being traditional mutual funds? Bogle likes VTI and SPY to buy and hold forever but the assertion that ETFs are bad because they can be traded is ludicrous. As mentioned before he is really attacking human behavior not the product. A couple of years ago Dylan Ratigan was going to interview Bogle and of course this same line of thought was coming so I emailed Dylan before the interview and pointed out that this is really about human nature, by coincidence or not Ratigan asked Bogle about this on the air and Bogle sort of conceded the point.
ETFs are just a tool. I promise you that people in the past have misused every single tool in existence and will do so in the future. The rest of yesterday’s CNBC segment focused on elementary discussions about potential adverse complexities with commodity based products, funds where the components are thinly traded and so on. It became a reminder (for people somewhat familiar with ETFs) or an introductory point that you need to do homework, look under the hood and understand the dynamics relevant to the fund. So telling people they had to do work.
On a related noted my last few posts about social security have generated a lot of comments at Seeking Alpha. Some comments liked the starting point of self imposed means testing and some were critical which is all fair game but there was one line of comments that popped up in a few instances that was very disappointing and frankly very emblematic of one aspect of the problem.
I noted a couple of times that given how “broken” the US might be financially, any real solution will have to involve sacrifice on everyone’s part or if you prefer unfair treatment, punishment or any other word that has a negative connotation. I believe that I set the expectation that anything I might think of would involve everyone taking a bit of a hit somewhere in order to help the country get back on firmer ground.
Even still there were comments along the lines of “why do you want to punish me for being responsible?” Other comments that were similar seem to fail to recognize the magnitude here. The math on several fronts does not work (read Bruce Krasting for detailed content about social security) which threatens our country. Threats like this first require recognition (not quite there yet) and then require an adult response–a sort of tough get going type of thing.
Ed Rendell said we have become a “nation of wusses” because Sunday night’s game in Philadelphia got pushed back due to snow. It is possible we are becoming a nation of people who do not want to work hard enough to achieve what we want (like thinking we can get rich buying ETFs we don’t understand) and becoming a nation of people who are not willing to sacrifice for the country, in a non-life threatening way mind you, when the country needs that sacrifice.
What’s past is past. If you have $2 million saved that is great but it also means you need your social security check a whole lot less than the one of the 54% of Americans who has less than $25,000 saved. Thinking of this as unfair punishment is a bad way to look at it. If you have $2 million then chances are you are at least on firm footing and have a few choices about how your life goes. That sounds fantastic to me and I’m pretty sure the guy with $25,000 would trade places with you. Obviously no one would trade their $2 million portfolio for a $2000/month social security check.
There are of course many complexities and nuances here, I’m not a fan of bailing out reckless behavior as one example, but we all have a vested interest in seeing the country get back on relatively firm footing and should be willing to be involved on some level, especially a noninvasive, non life threatening way.
Who in your life have you respected the most? What would those people have to say about working hard and making certain sacrifices?