 And normally I would introduce them, but I don't think that Jack or Bill or Bernstein need to be in the introduction and we don't want to steal the time from their conversation. So at this point, we, well, this is a free, ranging, non-political exchange when we break that rule. So, anyway, this is called the Power Side Chat and you guys have it? Well, good morning everyone. Jack, I'm going to start by asking you like a question everyone wants to know, which is what does the retirement... Can you hear me? Can you hear me? Can you hear me? Yes, okay. What does the retirement of Bust me to those of us who invest in these indexed portfolios? Well, first place, he's been a great guy, a fabulous friend, a terrific mathematician, certainly one of Vanguard's priceless assets. But think about what he's doing. He's matching the market and that is not complex beyond belief. There are lots of nuances in it, but if you follow the performance of all of what's safe, there's some good argument here. This is the 500 Index Funds. They are all the same when you adjust for an expense ratio. Everybody has picked up how to do this. Heck, it may be that Gus told them all, but I wouldn't spend 30 seconds worrying about what happens next. And, you know, an index fund is an index fund. And one of the great things about it is that when you buy an index fund, you're really investing for life without worrying about who the manager is. Think about this for a minute. First, if you like this, maybe you'd overspend, say 50 years, whatever it may be. Some of us may not have quite that many yell left, but there we are, but over lifetime. How many managers are going to be there for a lifetime? And the answer is none. They're going to come and they're going to go. Funds come and go. Individual mutual funds come and go. The failure rate is about 50% every 10 years. Don't worry about that in an index fund. Regular funds, managers change every five years. So over, say, 25 years. You can start right up in that year. If you own four mutual funds, 20 managers in 25 years, roughly a manager a year. What is the possibility that 20 managers a manager a year can beat the index at zero before it goes to, you know, maybe it's under the 1%. So all the index fund has to do is match the index, become a commodity, and for all of Gus's fabulous contributions to Vanguard, he was the one to say that he likes to say and I like to say, I was the architect and I picked a great builder, and that's the truth of the matter. But his retirement will not trouble anybody in this room, and it certainly doesn't trouble me, except as a friend. Yeah, I mean, I should mention that just to amplify a point that Jack made, it was always something that I would wonder about, but we all know that, you know, over the long run, the odds of getting an index fund are 20%, which would be kind of horrible. But the odds that you're putting together a portfolio of active managers that would be an indexed approach is much smaller than that. And Alan Roth, finally, did that study, an excellent study, in demonstrating exactly what Jack said, which is that you're the 1% when you're putting together a portfolio of active managers. Do you have any comments, Jack, on the switching away from the MSC on indexes? Do you think that's any significance at all? No, that's just a kind of funny thing. It was a closely guarded secret that we were thinking about doing this in Vanguard. And, well, I have lots of contacts there, in touch with a lot of people, closely guarded secret is something they shouldn't tell me about, and they didn't, they shouldn't. And I looked at it and the secret comes out in the paper, and my first reaction was to yawn. It doesn't matter. The idea that, say, an MSCI 500 if they have one, or a Russell 500, or a Vanguard 500, or a Dow Jones total stock market, all of them, old Wilshire 5000, and there are probably half a dozen other indexes at that like 500 level or total stock market level, and they're all going to have the same return over the long run, no matter which firm is managing it, because large cap stocks are large cap stocks. The correlations between managers and index portfolios in that area is going to be 100. And later on, I'll show you a chart showing, and it's sort of relevant here, I want to get into it until I have the chart, but the idea, my idea has always been on for everything we do, including active management. I used to call it relative predictability, I would call it consensual predictability. And now when this modern age wants, we want to have my R-squares. There's no change, except you can understand what relative predictability means. I mean, I think it's an interesting issue. I think it does matter a little bit, maybe at a basis point, I'd rather be indexing an obscure index, large cap index in the S&P 500, just from the new constitution and the expenses. I'm much happy with the large cap index when I am looking to index the S&P 500 if I want to index that particular area. Check, let me ask you, I mean, basically I agree with you when that is, I was making this point to talk about total stock market index funds, total international funds, all with very heavy large cap bias. There could easily be differences between the S&P, what is it, the 400 or something down there, small cap index, 600 for the small cap index, and the Russell, they have different ways of reconstituting, some are better or worse, you try to get around like a lot in that fight using different indexers, but it has a broad generalization, and when you can save as much as we are saving, I don't know the exact number, but it's a good thing. These guys get away with it very rarely, I mean, if you saw the stock of MSCI, why an index provider is publicly held is another good question, but their stock dropped 33% or something the day we made this announcement. We saved money, they lost money, and so hats off to Vanguard for doing what we, you know, eating what we, what do we say, eating what we preach or something, eating what we cook, and so, but it doesn't, I think you do have to agree with Bill here, you feel more careful, it's not a lot more careful in the lower areas, but a firm like Vanguard or another big indexer like Fidelity or BlackRock is going to be, you know, very much able to do these things in the right way, and if they aren't, time will emerge and tell them that, and they'll have to change. So it's, I mean, I've never done this before, made two brands of generalization. Well, maybe almost never. Almost never. That segue is jacking to another question that I have, and this is sort of a personal interest of mine, and I apologize for dulling in front of this audience, but it's a very interesting issue. I mean, Vanguard is a nonprofit, and it's a nonprofit which is slowly gaining market share on those companies that supposedly should be benefited from the invisible hand, and it's not the only area in our society in which nonprofits outpace more profit-centered. I'd rather be on a school, for example, that's run by a nonprofit than one that's run by a city man. I'd rather, you know, how many great for-profit universities can you mention? You know, the University of Venus is the biggest one. I don't think it has the best reputation in this country, and so there are some areas that hate paying doesn't do as well as a nonprofit, and you've written, of course, the performance of mutual funds and their corporate structure and their corporate leadership. If you have any reflections on that, let's look at it this way. The one thing that distinguishes the mutual fund industry from other industries is the relationship between cost and return, dollar for dollar. In other words, you would not necessarily cost-determines return, but if you get return acts and deduct 20 basis points from it or 10, you're going to have a big advantage on someone who provides the exact same performance and charge the exact same kind of fund and charge the 100 or 200 basis points. There's no way around the man. So as long as gross return and the markets are in your fund minus cost equals net return, whoever has the lowest cost has the highest return. This is not complicated, and our industry is just finally trying to catch up with it, and they don't know how to. The problem is that it is very simple when they are in business to make money for themselves or to make money for the financial conglomerates that own the management companies. For those of you who have read my book with great care, if these aren't the numbers that are in the book, forgive me, but the 50 largest mutual fund management companies, 36, I believe, are owned by great big financial conglomerates from Canada, from Canada in the line, Deutsche Bank, and so on. And those companies have bought mutual fund firms to earn a return on their capital or corporate capital, say Deutsche Bank. And the interest of the shareholders in that fund is to earn a return on their capital. And that's a conflict of interest right there when you're in business to make money for yourself and the people that you're investing toward that you're in business to make money for them. But they have a great difficulty in competing. Another six or seven firms in this industry are publicly held. There's their own stock holds around. And so I think that leaves about six firms that are privately held, six big firms, which of course would be Fidelity Funds and Dodgercocks. There aren't a lot of them. And then Vanguard is sort of privately held by its own shareholders. You want to look at it that way. So that's the... tremendous advantage because this business not only is cost everything, but cost can be measured with precision. I mean, if somebody else's, I don't know, Lincoln Continental is more valuable than somebody else's Mercedes, Benz or Jaguar, all that benefit is in the mind, in style. Maybe a little bit of construction, whatever it is. Diamonds, maybe a girl's best friend. But it's very hard to measure precise value. But in this business, you can do it. You can do the math. You can see the math and see just where it comes out. You have to estimate things like turnover costs. We always ignore sales commissions, which is still a very big part, sales low and big part of the business. And Vanguard has, you know, because of our structure and the kind of funds we choose to run, we have very low portfolio of turnover that costs us since we're zero. We have no sales lows. There are, say, 18, 20 basis points overall. V, sometimes as low as five basis points, with others who are on average in this industry is to call out their basis points for fun. Just have this huge advantage. But they can't compete. The example I use is, I might just rattle on for one more minute here, is that, so we're up in Fidel. And there's Ned Johnson. And he says, then God's ideologue, do something about it. Get everybody in the room and say, what are we going to do? Ned Johnson is eating on lunch. I'm a little humor here, aren't I? And so they all come back in a week later. So we can get the expense ratio down by eliminating your profits. Yeah, sure, that's going to make the guy happy. Cutting out the marketing budget. No more green lines running our grocery television screen. They're coming much more efficient. Taking big bonuses away from managers that don't perform. And I think if we do all these things, no marketing, no profits, much more efficient on the investment side and on the administrative side, negotiate with the custodians, the whole works, we can get down to 50 basis points. And I won't try to emulate Mr. Johnson's accent here. He says, 50 basis points? Boy, we'll be 250% higher than that gone. Why would we do that? So what is his option? He cannot do that. He will not do that. People don't like to cut their own throats, right? So he's going to keep milking that cash cow, which will probably last 20 or 30 years. And that is the most, without any measure at all, the most intelligent business decision he could possibly make. He's doing the right thing for his personal standpoint, the standpoint of that program. So if he was doing it as a fiduciary and not a businessman, he would do just the opposite. It's a problem Vanguard has that we've gotten such scale now, $2 trillion, oh my God. Oh, entry. You know when you get to our scale, someone operating exactly the way we do, which is really impossible because no one's going to be pretty close to 95% index. I'll talk about that later. So you've got to pay the money manager something. But if you just pay the month performance, pay the firm month performance, that would be a good thing for the clients but a bad thing for the manager. But you could probably get to, let me see if you can get to 40 basis points. So what? As a wise man, the neighbor of Ham Lincoln once said, the world will know for a long remember. Yeah, I mean, you know, it's interesting to be brought up met Johnson to a wonderful audience, I'd probably say. It is that met Johnson will do it. What is in Fagality's long-term best interest and he may be able to play it out for decades to determine his heirs and heirs. But that's still a better case scenario than what you've also written out, which is what happens in publicly traded companies where they don't manage the next quarter's profits, which is a recipe for disaster. He was also warmly able to something. I think it's worth, you're probably not wanting to know more about this. People become second-grade teachers and Marines and join diplomatic or not for the money they do it for, more reasons they think the world is serving a useful purpose. And I think that the people at the vanguard go to work in the morning and realize that they are serving a socially useful purpose. You saw a maturation, of course. You saw it as a useful social enterprise and I think you certainly inculcated that corporate culture. Just that everybody who works at the vanguard can be working for somewhere else for a lot more money than you. You say it isn't so. That's good. You didn't have two, you didn't have one more popular one, two more now, which is I think someone pointed out. And I think that's the issue, is why are you doing this? And I think the people who work at the big Wall Street firms are in it for bucks and the people who work at the vanguard are in it because they want to be able to work themselves in the mirror. And I think there are some activities that are socially useful, like providing the expense of investment products, save investment products as well, but making widgets is not. You're not going to get non-profit car companies you need to do this again to make those. You know what? Alternatives. David Swenson's had a rough five years of it. Not bad. Yeah, not great. Yeah, not bad, just not great. Do you think that he, do you think, why do you think that is happening? Do you think that the ground has just gotten too covered? Do you think that he has a different approach on all this than the Wall Street building right now? But do you think it's possible to sustain that sort of performance? I never believed he could sustain that kind of performance. And I said that to David who was a great, great human being. I mean, just a straight arrow. I mean, there's just nobody any better as a human being and then combined money management. He's just a wonderful guy. He went to Yale. He went to Yale. I guess he didn't go there. And so I have great respect for him. But I said, how can you go on like this in the future? And he said, Jack, you'd be amazed how many stupid investors there are out there. And I think there are probably fewer than expected, Bill, fewer than expected. But there is, the advantages these university endowments funds have is no conflicts of interest. Infinite time horizons. No worry about a massive renunciation. And no daily reporting, weekly reporting, monthly reporting, quarterly reporting. They haven't even got out the report, just getting them out now in October for their fiscal years, which always ends on June 30th academic year. And they're just getting paid out now. And it doesn't look so good for last year. I think it's probably going to be about a 0% return for college endowment funds. And I combined, it's so hard to deal with my poor aging brain has a great deal of trouble going from college fiscal years so when I tell you what the return on a fund stock portfolio say, well, I can fund or balance index fund was in the year end of June 30th, I frankly had no idea what that 0% compare with. Well, it turns out to be about 6%. It's the average for 60-40 indexes out of last year. Roughly that. So the colleges aren't going to come up to that. The disadvantages given to the advantage of it, and they have terrific research guys, and they're all over the world. They're innovative. They understand some of these complex instruments that the rest of us believe have a fighting chance of understanding so that they're good. But what gets in their way now that they've been doing that for quite a few years is basically the Swenson model. They do it at Princeton. Princeton is right up there with Yale. I kind of wonder why this is so. But very similar to the return here every year in the last 10 or 15 years. I think Yale is about, I don't know, 20 basis points ahead. Let me say 12% of the year compared to 12.2, something like that now. And so they're terrific long-term records. But what happens in the market is other people copy you. And, you know, the market gets more efficient. There's a lot more price discovery and high-treatancy trading and there's a lot to do with that making the markets more efficient. And when there's nobody playing your game as it was when AW Jones started the first hedge fund in I think 1950 or 60 he could do a good idea what everybody does. All hedge fund managers cannot, will not and are not above average. They're all average. And then you take that 20%, 2%, 20% of the games and 50% of the boxes in a year nobody can overcome that in the long run. So it's cost or a big negative efficiency, the relative efficiency of the markets is a big negative. People just getting wise to the fact that these private equity things and hedge funds are great compensation devices for managers. And private equity, I won't mention that I have a certain firm who's in the United States. But they rip people off, they borrow all this money to over leverage the thing and they pay it to themselves and it's pretty seemy stuff and I tell everybody to avoid it unless you're sure you can pick the right hedge fund manager, whatever it is. So when everybody is looking for shares of diamonds in their own backyard there's only one diamond there and so the price of it goes up and up as people discover that. So it's competition. These guys, the general run of people that are running these hedge funds and these quads is brilliant. I mean they are fantastic. Some of the smartest people I've ever met in my life and if I was to draw a scale here of the baseboard level over there and there's right at that top ceiling level there's a big gap there but when everybody is doing it they can't all win. This is not complicated. This is not like what we're going either. There's not so much alpha out there but my operating principle is something that's called Reagan-Foller's Rule which is named after John Reagan-Foller who works at the Morningstar. He slipped a lip. He wishes I guess. And Reagan-Foller's Rule for 20 years has been if the Bozos know about it it doesn't work anymore. And I see the Bozos now investing in the Yale model. We see people coming to us at our firm saying gosh we just got shown this by this big investment company that big investment company and it's the Yale model. Conventional. And one half alternatives. What's alternatives? Well it's hedge funds and private real estate and Timber. I loved Timber. I worked for 30 years in a place that produced nothing like Timber. And what's happening in that area in rural Oregon is these old families who've been in the business who certainly have how to send their sons to Wharton are now selling out to people who in Greenwich, Connecticut who have smooth hands. Where do you think the information asymmetry is there? I mean if you don't know your way around a 50 inch chainsaw and a children's cable you probably shouldn't be working in the forest or investing in the forest products. You know. The Yale model is the conventional wisdom now. There's a wonderful section in David Swanson's book where he says if you're investing in the conventional wisdom you will have your head into he's the conventional wisdom now. And I have to believe he's a smart enough man he's doing something he doesn't have. Well let me add a little icing on that cake by saying before I love this phrase whole new ideas go through these three phases. First the innovation Second the imitator Third the idiot So I warn investors not to be the idiots. Another great innovator was John Templeton John Templeton of course investing in foreign stocks, particularly Japanese stocks back in the late 40s when you couldn't even take good stocks and on the contrary a brilliant and incisive and you know when he saw people piling into Japanese stocks starting in the US in the late 70s he sold out to the US market. And so the most important work in the title of David Swanson's book pioneering portfolio management it's not portfolio management it's important work. You're not a pioneer and you're not first you're probably in the wrong game and that's something a lot of people don't realize. The other thing that we all know I mean if these guys can't get it right if all college endowments I see McFurry sitting down at the back you would have a marvelous article for forums about this very subject but they're not getting it right. What odds does the average client you know JP Morgan Stanley who's being put into all these private investments not very good I would suggest. The crisis we're now four years I remember you talking about the layman index this conference in September of 2000 May I think it was in San Diego when you used the word layman index you just about shrieked the word layman. We now have four years of respect for one of these jobs. We've seen how things have gone down. Do you think that we got out about as well as we could have ended and the second way the final question is if you had been hanged false and you had this position in September 16, 2008 knowing what we did now but you've done things differently. Let me say answering the first part of the question that you know when you're confronted with a possible financial comparative catastrophe that system is so over linked so over leveraged so misaligned in terms of its incentive that we just got totally out of whack and it should have been easy to see. I unfortunately did not see as much of it as I should. If I had spent a week on the west coast with a country wide mortgage salesman I would have come back and said out because you could see the way those things were building up. I don't call a mortgage company as Washington Mutual and so on never have but I had no idea how much out of hand their lending had gotten but it's so I guess really obvious that when you've got a bunch of salesmen trying to give you a $250,000 mortgage for a $150,000 house and you've got a $100,000 left over to yourself that's what happens or what did happen in some cases and in some cases people are making $30,000 a year some story about a great picker that was making $16,000 a year and he put it $200,000 house that's got to end badly right and so and then you break the link between borrower and seller and that's what happened in the mortgage business the banks would take those mortgages make their fees to mortgage banks sell them to banks who didn't care they probably didn't even look at them because they were going to sell them to some kind of a new underwriting of mortgage backed securities securitization so the risk holders were completely two levels removed from the risk takers and the homeowners back there who have been borrowing the money and that just went and maybe I was just not alert enough and I really feel pretty stupid about it personally because I didn't think it would amount to that much but if I'd known how much it was going on you would have been alarmed immediately just seeing what happens on the ground and a lot of us are a little more elevated we should be from the real world existence and you don't get in the ground I don't nearly enough and that's not my business anyway but it was such a big thing Bill Gross might have had some people doing the exact same thing see what's actually happening I mean it's really important don't take anybody else's word for anything so the crisis was going to come and it was going to be terrible and I think what would I have done if I were Hank Paul's I think I just would have tried to do a more comprehensive job and I thought he was said to somebody I thought it was a little punch drunk and then a few days later a punch there and then another punch and I'm not sure the greatest credentials for a treasury secretary would be an investment banker a very good guy a very smart guy and a very strong guy and without the strength not much is going to happen so I commend them for all that but I still think we could have done a better job we finally get the so-called TARC which was to buy bad assets it was so funny we called I think TARC was just something blah blah about getting the bad assets out of the banks buying the back front of them and that hasn't happened a whole lot of other very different things that TARC money was used for so I probably had to be used it I think I would have done more on more of a Keynesian than ever and not perfectly because none of those things work perfectly I thought I was the king two or three steps at least there were three steps from the drone done more stimulation more stimulation in the infrastructure side where we put people back to work and we may yet have to do that or try and do it because the greatest price an economy pays for all this ultimately is the lack of full utilization of its productive power so I think Ben Bernanke was very good I'm not sure what Hank Wolf amounted to without Ben Bernanke aside actually he was a Princeton professor he's extremely smart we all are I'm kidding and I think he's doing what he can but he's trying to do the impossible and that is he's trying to solve the biggest problem with monetary policy with the money supply buying securities with QE2 which I was taught as an ocean liner the I agree with the newest one it's called twist operation twist getting out of the short term security is a pattern and monetary policy I mean sorry fiscal policy monetary policy can only do so much big things behind the blow up in Europe the idea of monetary policy is basically European wide the idea of fiscal policy is each government's responsibility and you separate those two and we sure have to separate it here just because of the nature of our system the government's in charge of both finally but the legislative side is just so stymied unable to do almost any, I'll give you an example just show you how it's done so I hope that's not too political but we aren't we're trying to have monetary policy carry the burden and you can't, monetary policy can't not, unequivocally cannot do it all so we've got to do some fiscal stuff got a loan on us what's going to come out of this so-called fiscal cliff you know it's not going to go on the way it is for sure because it just can't be sustained but it is horrifying to me this is not a politically slanted conversation but this deadlock between the parties means no material legislation can get done in Washington D.C and the only thing and the only piece of legislation the two sides are able to agree on is probably the worst piece of securities legislation ever designed by the mind of man and that is the so-called jobs act, put jobs in it if you want to get it fast and it's supposed to increase jobs by giving small businesses access to public capital so all the constraints on very small companies going public and prospectus is all that kind of thing all those are taken down limited and it's much easier to raise capital out there but there are a lot of swindlers out there and they are going to come and swindle on an awful lot of people so we get the jobs act both parties think it's wonderful to deal with one day as far as I know it hasn't created one job but it's just a symbol of something that really lies at the root of many of the problems we are dealing with in this country and that is a political system that is in chaos unable to move and oftentimes it's a good idea for the congress to do nothing you could say one of the great blessings is congress can't act and there is something to that but none of these circumstances so we'll have to see what comes out of the election and see if sides can somehow reason together and produce what's best for the country instead of what's best for their own individual interests I know that's idealistic and I hope it's not too political for Mel for me to approach that my favorite economist of all time is Harman Vince the instability in our financial system touches on exactly what John was talking about which is that if you primary instrument is monetary policy then what you do is you get into the cycle where you stimulate Wall Street but you don't stimulate Main Street which is what Van Buren and he used to do there's been a lot of stimulation at Wall Street stocks have been on its air obviously assets have been on its air but it hasn't done the great field, done something but not a great deal for the economy, you want to do that you have to do it on the political side and so you wind up with a more of a map but you wind up with this very unstable system a physical system where you just get financial and boss in that that does all the things that frighten me, that frightens me because you notice there's this chronic instability in the financial system we went we started out with four bags that were too big for Dale and now we've got three that are big I think it's a very frightening situation it's why the boys believe in the portfolio side that you want to separate out your risk and risk as assets instead of being for things that would be like the most large things like that unless you're giving me a very reasonable risk it's an interesting example of congressional failure I think in that we've got the Dodd-Frank Act and they've got all these I think 194 regulations that were done down there all of them do what they could have done with one stroke of the pen by saying bring back Glass-Steagall Act we're going to let that out in the Battle of the Solar Capitalism of 2005 and all we ever say it seems so simple to me you could be in the deposit taking business or you could be in the investment banking business but you can't be in both we'll call it the mobile another question is anything about what we were talking about before I think it's important which is what do you see as the long term function of this organization of the nine parts what do you like to be seen as doing 10 to 20 years from now? well first of all I think it's unbelievable how it is convergent and I think it's quite remarkable what wonderful people you guys all are trying to help others and being the backbone of America you forget that too many places and people are doing all the nation's hard work and we're trying to be intelligent investors in the market it is just the office of intelligence so I feel very good about the message it cannot be the wrong message find another mutual fund manager in America that says if you do what I tell you you can't go wrong there's no one to say that I think Peter Lynch he was great in 1992 he left Magellan fund and it's dropped on the mentions later on from 105 billion dollars to around 9 billion that's a lot of disappointment for investors very mediocre actually worse than mediocre so for the extent people are looking people are looking all over the country for unbiased financial advice investment advice particularly and in the actual owners there's nothing any better than the owner of a product or service say I've done this and it works and so I see this thing spreading like an infectious disease if you will and pretty soon everybody is going to be affected with it so I see you getting bigger and bigger and I don't know the logistics of putting together your site I see some of this stuff and Mike Nolan my assistant sees some of it and gives it to me I imagine we have some full-time person at Vanguard who sees it and I believe that the management tries to respond when they see something significant you know on stages that kind of thing and I still get letters from shareholders asking me to correct these things I can't do that but I answer them and I don't know if I'm being already well or at least it's supposed to and so I think it's an idea an independent body of self-educated investors will learn the right thing in an industry that's going the wrong way so next year we should hire Madison Square Garden that that means to just have a great best question to our two people in the audience Susan, I don't know, Alex is around what's happening to website traffic it's I haven't really done the numbers but there's levels in activity and then I can't answer that overall but I think it's increased so it's also in the wiki side but not only from traffic but I'm getting a lot of comments here from people who aren't form members and they're saying thank you so it's not just the web traffic it's the people who are reading the form if you look at the stats of the views of the topic and how many people post you might have 10 posts but 100 views that means I'm helping 100 people not the 10 who post in there so a lot of the is for those people not just answering the question directly did you all hear that answer okay basically what Susan said that's Lady Keek what Susan said was that she's not sure about website traffic a lot of people are working basically and not posting and then the wiki is also getting a lot of traffic but Jack's comment I think is well taken which is the useful thing we do is the website there's a lot of good people on that website it's very high level and I think we are helping a lot of people and maybe just maybe in this era that is really where the actions went I don't know I think it's something that's worth looking at finally one more question let me just add one cool thing to that if I may and I was asked to write the introduction to the guide to investing and I came up with a quote from him Alexis de Tocqueville democracy in America and he talked about the tendency of Americans in the year 1818 or something a long time ago tendency of Americans to gather together to work on issues and to fix them and this is obviously to Tocqueville we're around today he would say man did I hit that one right out of the park of course Robert Button has written a counterpoint to that he says that we're not doing it as much but this may be the answer to that he's willing to admit that it's an interesting question and of course it's also social capital of the United States finally one last question and then I'll get out of your way Jack I've never been able to convince you to think about other people I really would try to do it but no other people can do this at all because it doesn't produce a good deficit it's not productive so we can't convince you about that it's a standalone asset we can't probably convince you in terms of portfolio automatic insurance and we're looking at a environment in which we don't know what is going to happen because of money supply and the velocity of money if someone came to you and said I just want to own a few boat of coins as insurance I hope they do what about the reason? I'd say be my guest we live in a totally uncertain world and if you believe in likelihood that gold would be a good performing asset in a bad performing world I wouldn't hesitate if your portfolio is a diversifier now 100% probably is not a bad working number to give you my opinion and recognizing that it's strictly a supply and demand equation when you buy you get no return on your money you buy it with the hope you can sell it if you ever do for a larger amount of money and you pay for it and so it's just another commodity with this peculiar almost universal use since the beginning of time so I wouldn't try and talk anybody out of it I don't have to do it with my personal accounts at all I would think about it in a long term account just because we don't know what's coming along and there is the possibility always the possibility of kind of a black swan event and that would be a helpful diversifier and unfortunately one of the things Bill you know this is that whenever somebody comes up with a diversifier someone with a hot performing asset will go in this case and says a great diversifier it should get an all time high no one called gold a great diversifier 15 years ago warped gold with a great diversifier I don't know maybe in 1960 and then they forgot about it they didn't perform well so either it is a great diversifier or it isn't but there is a huge tendency of our financial markets to rely on our financial promoters to rely on so you want to secretly watch that price of gold and it goes up so they try and intellectually justify it by saying it's a diversifier so I would say do gold do it in very small accounts and do it at all and with great caution this is the riskiest time the difficult time to invest I know and not so much the risk but the terrible returns I'll talk about this a little bit later the terrible returns on bonds the customary and inevitably the diversifier for an equity portfolio yeah it is the famous eel swam or ass resort with a great line and an awesome place paradise kiss goodbye I think that's the basic story of all diversifying and as well as that I will thank you Jack and get out of your way