 He's a giant one giant, a true American hero, and our group's now namesake. He's a visionary who founded our beloved vanguard, and is considered the father of indexing. His life's work has been to ensure that investors get, that we investors get our fair share. As we send the dedication to our moment's guide to investing, while some mutual fund founders chose to make billions, he chose to make a difference. Please welcome our friend and mentor, Mr. Jack Rowe. I don't know how many people get to know a welcome like that, and thank you for walking into a big crowd and room. Thank you so very much. It's wonderful to be with you, and thank you also. Not just for being here, not just for being with you, but for all you do for helping other investors and obviously helping vanguard throughout the year. I don't get a chance, really don't have the time to read everything that appears on your site. It's gotten so popular, and so, yes. And we've been very busy trying to do this presentation, and this is what I need some of you to know. My wife got me on a Monday morning, and she insisted on coming home yesterday. So my days have been filled with human care givers, and instead of the care recipient, so now I know a little bit more than what she's been putting out there for the last, well, 50 years. I had my first heart attack in 1960. So that's 50 years ago. So it's sort of amazing not to have any of that since that made me 7 or 8. And then I got my transplant 15 years ago. We had to take a very, very early person. And I have to say that it's quite remarkable, that my son, to be able to live through these last 15 years and see so many of the things that I hope for and expected come true. And you can't really think about how the world has changed in that 15 years. You don't explain it to anybody, but that's what he does. And I don't explain it to anybody, but it's a lot of awesome. It's a columnist in me, in the columnist magazine among them, named Bob Wood. His real name is Bill Cobham. And I read his column, and I hear me. It's his great PR from Vanguard. And even though he doesn't mention Vanguard, and they don't even say anything about Vanguard, he still doesn't have to be writing that. And that's the good PR from your ideas. So the evening in bed, that you don't need to have your name mentioned, either the company's name or your own name mentioned. So, of course, it works. These ideas that we had, but it's because they have to work. If you've got the man on your side, be careful that you watch out, that you're in real trouble. So let me just open up a few minutes after your remarks. I'm going to read the notes I wrote today. And now I would like to want to say thank you so much to Kevin, for all that he's done for me and Albert, for letting me understand. And for any of you who've been working for me, I'm almost tired of my sister's movie here, and we've been moving for the flight. I didn't go, OK, it's true, we've got nine years. I ran it all. I had a hard reputation, I hope. But it's my health, and the last time I spoke to you, I was in intensive care unit very long, also, and dealing with the second consecutive loss, really, you know, on several issues. And my health is good now. I don't have much energy. I used to have a long heart, but I did the upper hand and tried to workload the best part. But without any thought, really, of retiring, I don't know how to do that, actually. My wife, he was with us, and we worked 150% of capacity. So I cut back to maybe, what do you think, 80%, 90%, 205%. And I had to make that. But, so, things are good. And analogies I have, and what's going to happen next, but I don't worry about that. And I will never have to worry about it, and never expect to worry about it. I should say, in the last couple of years, I've been feeling more comfortable whenever I've been at the art meeting, I've seen them manage issues. As they say. Very fun to be doing that. I've been president for very long, for about 30 years, something like that. A higher pack. Probably 1980, 2003. It's been about 30 years. And it's come a long way. It's a very good human being and a good manager. And it's a triumph, it's succeeding. It's restoring some of the old and your own values and what you had to do before human treatment. And the very important part is that it's successful. It's a group that is very close. I thought that crew members of Manure Arts on frequency individually have each each 10 minutes of work rest and put it into an hour. And then people ask me, I've worked with them, they want me to meet them. And I went around and I stayed up and it's done. It's not the Manure Art of my life but I can graduate doing it very much and stay very much in touch with people that are meeting with me now. And to that, I do ball fielding at some length. I do my opinions periodically and I don't do as long as I have time to do. And I do those opinions to be honest with you and also to acknowledge that you can't I don't worry. You can speak, speak, speak. I do. I think he needs a little bit of that kind of work and we're able to work on it very often in that construction. I'm just a doer I was had been and I'm not a great and solid kid. Probably a dictator would be a good way of doing accounting. But I know that you build and also build business without being something a dictator. And we talk about the importance of teamwork all the time and I agree that it's important that I do it. That's fine. I should say on that point that to make sure that I want you to know very clearly that our relationship came to our management very good but doing these conditions and I have a couple of that that I do this morning as well but I'll not be able to because that's not something I'm going to political say. It's just that sometimes I'm a white man with a little work business and this is one of those times and so I hope you understand that and I think you will have a little joy with it which is good to even walk it and I'm going to say a couple of things in the first one I remarked I don't mean any marketing but I'm going to say a couple of things and you may want to ask those who are speaking to you tonight about your last concerns about what you're going to do and I'm going to do just some angles and I can tell you the truth if I say it. So what we said, what we see of Angkor today and I guess you might have a remarkable approach I think there would be a lot of power shift as a leader I think the name of Angkor and we'll count a little bit after 35 year 37 year run taking us to the leadership of this industry we hit the bottom of this copy and that gets to a very fundamental thing about the individual industry and that is it's one for the benefit, for the managers it's not for the benefit of the investors so the idea of running something for the benefit for investors is a pretty much a unique idea and that's what's good about Angkor and that's what makes it successful it's amazing that we've had in Angkor's history an incredible change in the whole investment department yet the human values against the human values is an incredible system and a single investment strategy that we follow since our family are still largely intact and low cost wins the long term investment is our speculation the investors will invest for the long term with our shareholders and no one wants to compete with us on a price and we'll talk a little bit about that later on so there we are so it's been a very privileged honor we had in Angkor but that is nice to see I guess you could say the ideals and we'll go to that next slide on Kev this is just a story of Angkor's growth in that low point when we were pulling ourselves together in 1982 when our assets gained 1.4 billion on that chart and we grew up with 5.6 billion in 1982 400 billion there was just 6.7% there in 1998 or so and now 1.4 trillion 1,000 times more on each asset one might say just a few almost to your house to deal with and this is an important point and the industry already with the deli and you can see that chart says to buy a message but I don't know what we want for a second this is the third year in 1998 and we're actually providing these are the long-term assets I'll talk about it because the money market comes out of things capital groups a major factor in the business but under the capital group and their own interest by their money market comes for a long time they're not leadership and the deli is a huge money market business and the reality is when we've seen this in the rest the Vanguard is now 75 billion dollars and the reality is the numbers to our 85 billion the deli is the $175 trillion $390 trillion we'll talk about it soon so when I have that measure that's $150 billion dollars to have the deli if you look at the long-term assets chart here Vanguard is in the trillion $225 the deli is $500 billion dollar difference for this one industry leader and it doesn't seem to be getting any better when we ask $3 billion dollars to share holding and purchases and the deli is lost so I'll talk about that in a little more detail in a second but there is one respect in which the deli is still a champion the earnings of the Vanguard are coming to zero and the deli is earnings of $2.6 billion dollars $2.6 billion dollars so we're not meeting too well now we'll be all fired up right? we'll start with respect to the point of view if you go to this next chart here and it's going to be and who the leader is going to be and you'll see in 1950 here before I came to this business I was a well-informed man and we were a good size firm over that 6.1 percent from the passive base $142 billion dollars and we got that $142 billion dollars 20 months of cash flow today I think and by the way come on we're getting serious and it was then I think it was the first vice-versa big and direct selling organization out of Minneapolis and then it became American Express and then it became American Cloud so their resource and it's the same company with all those name changes but it was the second biggest firm in the business about 1960 and Columbia IES is the biggest firm and so on down 1970 to Columbia to the IES and that all you can see and I'll talk about that and then Russell hasn't been here to this chart so we'll go over to the next one so we're here we lost him in trouble I guess we'll probably have a little years that we'll look at out here there it is we have 1990 we have 11988 actually Merrill's firm in this industry and now of course it's mutual and that could be so long and by a standard I guess into the top group and we start moving up 2000 and the second one I'm developing by the end of 2010 current date and we did three assets up to 7.9 trillion one hundred and ss 7.7% and it's uh driven to that point I think first my investor trust survey has done this I don't need to read the survey but I have to share all this and read the newspapers the trust there's no company in this industry that has been in the tennis world that has the same operating it's kind of a money sale and we're up plus 50 to 60 and the second firm is going to be plus 30 and we need to fund our fidelity minus industry I think and the industry our industry is about minus 12% industry with a minus 12% trust ratio I don't get it from that but that's not good and we're at the top of that but it's kind of a natural movement other reasons include we're interested in bonds you know it's amazing I've always been interested in bonds and at the point where in 1972 I want to start a bond I've got these notes from my bar and you must be in that bond till yesterday stop tomorrow don't start a bond from the first time you miss me now at the time I'm an institutional investor I've covered the bonds your debt and then I knew it was not good and I didn't get it done we're directly supporting the board we're actually managing the company so I kind of ended up creating a fund that was $2,000 in bonds and $3,000 in stocks and people were also getting them so we're going to be at work and we'll pull it out we'll pull it out from there so bonds go back a long way and then service we're telling about the service we have and that's kind of the end of our first bond we're going to have to do more and next I guess I'd say importantly, we do the old bonds which is not much it will be our fair share or whatever it turns bonds stock market gems it's not a grand plan but it's the only realistic plan in this business so that's been an important part of it another part of that I'm going to need to explore that is that basically we have no need for it and I realized this from the beginning that there's no point in building a firm they're so big they can't match the assets they have and I knew that we would get big because we have them half on our side this is not complicated two is two and we're okay it's one minus one one two and if you get big you can't match the assets and that's what happens they're not bad they're nice people but they've just gotten too big and they're not money and they're super big so being size and different kind of investment strategy that's where doesn't really matter how big you are you can still venture strategy the same way and it includes a trillion dollars if you could a hundred million dollars a million dollars so that's another big asset and of course the next one is cross and I feel that way because I know that most people realize how incredibly important of course is this equation that we have that's going to have to be for once so if you want to draw that next chart I want to start I want to draw that myself this is called should it be white and just look at that MISD MISD MISD MISD think about that IDS direct marketing was the largest firm in this industry for 27 years the deli was the largest firm in this industry for 21 years and now here we are on our first year a blank year cycle 20 years 5 will it be 100 I don't know but I do know that MISD lost had to wear it around and there you are party full and certainly no room and no room for complacency what do you think of drawing from a 15% market share less than 1% and what I don't read very small portion is 0.7 they say they say causing that flash they actually got the idea of one firm before that flash but they gave it a shot so it wasn't just that fragile one it was probably the most amount of things and even through a well managed firm producing really good performance at least in recent years and a lot of cash in our shares and we came to look at Franklin even with a merger with Templeman before that and 0.2% so far there is no room for complacency I want to come back to cause this act and talk about the law center in this little orange picture and we put out you're probably seeing it in our in the main card or we have a little calculation that says you do get your expenses and I'm doing this I'm doing this chart since way back in the 80's when I was a law people thought there was a pretty good manager and the numbers he crossed they figured it out a little bit and we actually lost one manager and I entered it was a good amount of managers and he had a great record but he was working on the 15 basis point expense ratio and I went to him he had a 1.15% expense ratio and they said what happened to all your management of the law I did the last grade law but you couldn't have done the math it was all the math and so I've been doing this for a long time and this is not good at all so what we see what you see and what we record is our stock funds we have a lot of funds that are balanced about $89 and overall $82% very good records and in terms of our years over the previous decade then you take expenses out you can have those numbers changed stock funds are about $61 or $42 from someone above average to someone above average and the comparison is totally fair probably about as fair as you can get because no one's trying to know what they're using but any user that is can't know what they're using and the balance funds drop 10 points and the money markets about $1,000 and you're telling me you've also got an advantage the money market funds go up 140 and the overall goes from 80 to 51 way above average is that bad to be way in the money market area and only $57 in the bond area the answer is no and as I don't mind being low average before you adjust for expenses because at least my approach to all this when I was running the company was don't take any extra risk for the country to be safe and the money's 12-15% cash reserves that cost should return so that still had the poor expenses above average return how do you even write it because there's no free loan chapter and so that's the way it looks and that just shows the global cost and loans performance and we forget a lot and so I'm going to try to date to talk about our growth and efficiency and one of our market limiters that we don't see much of is that there's our assets from over there for $3 million, we're trading for growth for our expenses and we don't want to crowd the produce and the expense ratios but that's a scratch line a little bit and I want to say our expenses grow up $400 $470 full increase in assets and so the expense ratio comes down by a little over half obviously a few percent and I think it's not so good when you have all the companies they all pay the expense ratio I think we have a problem and we're having an error problem and that's the basis point again is $140 million so you say there's an accident and it's been $140 million and nobody will ever know the difference you know that's what it is, $23,000, $24,000 does anybody have a difference we don't have that it's not even a real number if you have to take all the loans and parts of that and we manufacture that in a good sense we do it right but I don't know if it appears to be a funds report or anything like that so it's an advertising program it costs about $50 million it's easy just about the third of the basis point I'd say I question that I'd say stop and I question the answer and the basis point is $50 million and the knowledge of dollars knowledge of the money and the fact that we're longer and the basis point or third of the basis point $50 million is not something to say well that's the only reason we can afford it not a good idea so that's what the chart really explains you know people have to be very awkward most of the companies have the best service and still have the lowest cost do you have the best service despite the lowest cost or do you have the lowest cost and still have the best service it's easy if you need to spend money on services it's basically if the services are good because we are the lowest cost it's the bottom of that and if you're an application and the low cost someone says we need $10 million to get that statement and you say I mean not a lot even not a lot but basically it's a chart so it's still about $55 million for the $8 million for the it's a nice testimony to the scale to the role of technology communication, telephone much smaller now compared to internet communication and we have very good management too not much of a management I don't care much of a management I don't have to do it there's a lot of people that I don't know I don't know a manager and I'm pretty sure I'm a leader and I'm confident or I don't know my business or I'm not sure and all those things are true I don't want to say this is being recorded but just coming back to the fact that these principles that we had at the beginning basically per man intact just lose a little money common sense in developing index funds and developing the financial fund funds you can have a mutual structure you can get a cross out you can get a good sales load and then in deciding if there's a rule of nobody in 19 and 92 and that is differential risk you're likely to share the loss and you will see you'll see at the end of the apple in the apple treasury funds in that at $50,000 $80,000 or something like that very low in the beginning that I was soliciting in 2000 and then we had ways to add more classes in nearly all the other funds and that's low cost for investors over $30,000 buying more so there we get an animal class we got that name so by 2005 that was 26% of our assets in the apple class and now we've been in recent change we've read it out and we've got that in the global interest rate now taking into account the amount that's going to go over to the account that we eligible it's going to be something like 30% of our assets and it's not only going to be a great amount it's going to stay out of the $100,000 amount of money that's going to be run it's going to stay out of the $100,000 amount of money that's going to be run so the $100,000 it's going to build up and it's going to come into the funds and it's going to be a large investment in the global interest ratio so it's really a good reasonable and symbolically simple idea anybody could have thought but nobody did I don't understand that and I had to read a little bit of it but yeah I talked about this in the same class that I did today because I talked about this in 1923 I had a management meeting and I decided that I had to be sacred cats because they were never and they were never going to do not responding enough people thought we would not respond to the possibility of our competitors with lower prices selectively in the future because I was dumb enough to think well, Vanguard has a probably at a pretty basic points in that ratio and let's have passive funds for the 25 or 20 I would have known a logical thing with all your hero prices to do what do they do? nothing so as I said to them we'll introduce lower cost funds known as Admiral funds for our larger investors we must teach them how to make sure and then let's see I have an idea the genesis of Admiral concept is the speed to the crew and this is page 976 the character counts the genesis of the concept is obvious in sight it's the cost of handling a shareholder to have a fixed larger investor to generate substantial quantities of scale sooner we can deliver these with the leverage for our investors there for the only matter of time I'm on for our competitors we'll have to offer lower price funds for the largest investors which they could at least take lists of the anchor costs and manage I continue to have a treasury fund get a few assets and investments and insure investment designed in fact to retain substantial investors they were an hour away and I need to bow letting our rivals know they better agree to offer a price competition and that's just exactly what happened and I think we've inspired yet another shot for us the headers bowed and we used new ideas of the Admiral taking account of the level of our expenses and now it's a great thing to do with a decision by a manager I was on Bob anyway so I came but I just want to make sure everybody understands this is not a gift for our investors I mean think about this for a minute it's just a reallocation of the cost that's all because fund A of the anchor structure has lower expenses then fund D will have higher expenses because our expense number is 5 on the fund through a year and I'm going to go over all of that and some questions with Odeon how we allocate these benefits from one fund to another so it's a not a gift but it's a small reallocation of the cost that will go without the cost buying makes longer in the future now let's go to number 2 number 2 yeah all right you don't have any interaction with any investors this is a toy why don't we go back a couple and go one more yeah I'll be getting the experience that's where I want to start and then we're going to ask them to share and then the compensation okay so we will work hard we didn't have a couple of times before but in 1995 I think in 1994 I wrote a book called Triumph in the Industrial and now I might have a little distraction and actually I wrote a book even earlier than that and there are just two world-wide I haven't seen what was happening and it sounded like a nice phrase and Yeah, certainly we now have the triumph index. In the past three years, indexing has taken in the index funds and they can enter in 340 billion. And actively managing that's lost to 160 million cash wall. So they industry 80 billion for that number, like in the common stock months, actually less. That plus 80 is plus 340 for indexing and minus 360 for active management. And I mean that's going to change. We can't stay that way. But over time it's got to be in the direction of the trends that we're in because people are waking up, institutions are waking up. And the federal voice fair plan is an index fund for operations and moving for indexing in their 401k plan. It's just a 90s time discount that they've walked through. It's about time. You can see the share of the equity fund assets done in indexing. And from zero in 1990 to 23.7% now it has the trend that no it is. And the one thing that's pretty obvious is the use of the title on speeches. It's a great paradox that active management is taking more and more like indexing. So indexing is getting more and more like active management. I don't like that. I don't believe it's important in the long run. And it was type C. The ETS share, the equity share, it's going from zero of course in 1990 to 23.7%, 30%, 52% is more active in the ETS. And then there aren't any conventional index funds. And I think that's not a reason why all of that remains. And there's no reason that that entire ETS share couldn't be a conventional large cap. It will diversify the index fund's help when high-turned over. And all of them have very high-turned over. They're high-turned over with draining vehicles. And in this context I don't want you to share an asset. I want to make another important point about the composition of the ETS assets. And that is, the management of our PR people said if I could expose 70% to 50% of the ETS assets, I would index. And I use the number for that 95%. And the difference comes in here with what we call the micro-versual index funds. And those funds are operated like index funds. The high-curval basically invests with low expenses and with very low diversification and very low-turned over. And so that would be our multi-manager funds. By the way, for most of our higher multi-manager funds it would be some way or another some earlier. I would go for our multi-manager funds. In a very simple way. That's why I can say that we can hire 6 managers in all of our areas. Does anyone here believe that? I mean it's just absolutely impossible. And I tried to do it. I tried to pick 1 manager in all of our areas. And I had a pretty good bag of managers from picking managers from our area. It was probably pretty close to 50%. I allowed for our money managers from management funds as I love multi-managers. And we had a couple of occasions where we would not use it and come back to them. But I figured if we picked 5 managers and did a good job at it we'd be averaged. And we'd pick managers over low-turned-over steps that we could. And so we'd win because of AR expense ratios. And B are the low-turned-over turn-over costs. And C are assets of sales dollars. And I figured that would be good for about a point and a half year performance. I wanted them to be averaged. So they're kind of placed index funds indexing to say large cap growth. You know 5 managers I think 4 or 4 points or so I'm not so sure. But the same thing for 6 managers we can explore. And it should be about average except that we'll win by about a point and a half year. And if you win by a point and a half year you will win by 20% over a decade. And that's good enough for you not taking excessive risks and you're delivering the same returns to your competitors apparently delivering the same returns to your competitors. But you're winning over by a loss over time. So multi-manager funds and money market funds are in that category. And the municipal bond funds are all in that virtual index category. So we're really heavily dependent on indexing or no one else is afraid of indexing on globally diversified low-cost low turnover state of course. The kind of funds and for 80% of the measure on this chart I think is even higher than that. Just to give you a few examples of what that next chart is. Just looking at the correlations going down here. The index funds are 98 or 99 or 100. The virtual index funds are 98 or 99 or 100. And the actively managed funds are also remarkably high. If we'd like to build our own managers that's just rocking the management economy around the world. But they're the only manager. And the two in correlations are remarkably high. You can provide a pass to teach exactly at the cost or low and turn over a buy in large as well as a low competitors to teach exactly at the bottom of that chart. So I don't know if anybody would expect that. But you throw these virtual index funds and you can see the correlations there in 96. And you can see the cost. You can see the turn over at the long-term treasurer. I'm not sure why the turn over is so high. But that may have something to catch up. But then even we're really at the index firm. We're at the middle of the rolling firm. We're at a globally diversified low-cost low-turnover firm. Would he use the word index or not? Obviously, the future for indexing, I think obviously, is bright and very, very bright. But as I talked about, and to me index funds have another great business and social purpose. And they are, in this era of rampant speculation, the only long-term investors left in America today. You read about when these trading firms hold this position for an average of 11 seconds. You know, 11 seconds. Now, I don't know how you feel about that, but to me that is not long-term investing. So indexing will go over. But I think one thing indexed that has to occur to you and should contribute to our society is a much greater, active role in the world of economics and mutual funds. Very lax, which my industry is very lax in that. And index funds, I look at people say, well, index funds aren't active, so they will never do anything. But I look at exactly the opposite way. There we go again. And that is you know, if you do an all-street rule, if you don't like the management sell and stop, an index fund can't do that. So we have a new rule. If you don't like the management, change the management. And that's where the index funds are in position to do the average mutual fund holds position for a year and the index fund holds whatever. So that the natural and long-term investors who can sell and have to get more of the governance and corporations go astray. The new SEC rule, the proposed rule on the corporate governance is any group of investors who have three years out of stock for three years can submit resolutions and nominate directors. And I don't know who owns what's off the three years of the index fund. It's a long-holding period this day. I think it's a good rule because you shouldn't let the speculators have any governance that are interested in long-term value, that are interested in short-term price. But it's peculiar that the index funds, one recent survey I saw, the index funds from Vanguard included in the Vanguard on the State Street and BlackRock were at the bottom of the list in terms of corporate activists and governance activists. Not the top of the major list. And it's been very, very hard to get anybody in this industry interested in corporate governance. No matter how necessary it may be, part of it is, I guess, that you don't want any corporate governance to preach in publicity. It brings you enemies. You may end up voting against the management of a company whose pension plan or whatever you think you're running. And you don't want to do that. Everybody denies that. And there's no evidence that says attacking with the mutual funds are so unactive, inactive in governance, that the fact that they're inactive is corporations who are serving as pension managers. And it's just one more form of inactivity which doesn't seem to matter. I was particularly concerned because it's kind of a sidelight thing that I thought I'd mention. And that is when Supreme Court, the outrageous decision in February, I think, a lack of corporations turned over years of precedent. A lot of corporations could give their shareholders money for political contributions. I was just outraged. But I thought, even though I thought maybe disclosure of those political contributions would be kind of a reign on their giving, I wrote an op-ed for Business Week suggesting that investment managers put resolutions in the corporation. They don't say resolve corporations but make no political contributions without the approval of 75% of their shareholders. And that went on so we know more. They haven't heard the last of it. You better believe that. And then it got even worse with these recent Supreme Court rulings allowing these 501c3 charitable institutions on a promise to use half of their contributions for political purposes. So these foundations are created to be political in nature and anonymous in nature. So that break of disclosure is now gone. And so these corporations will be able to give away all of the foreign money they want for whatever purposes they have to do. That's an outrage to our democracy. It's an outrage to our way of life and so I haven't given up. And I think the next chapter in there is going to be written. And we will see as we can make some progress on that. A big part as I mentioned of the index business is ETS. And just to be very clear, I have no problem with the ETS. I think they're good if they provide a significant expense ratio advantage. And that doesn't seem to be the way the industry is being driven. Here are the market leaders in ETS. It's a trend that's actually a little confusing. But the first thing to jump-side against is at least the three big indexes now. The ETS manages the vanguard and coming in late to the third but growing very rapidly. You can see that the next business is going to try to do a really small amount of companies and most of them are doing more or less the right thing. You create ETS products. And I don't know why anybody would buy an ETF for Brazil or Germany or something. Maybe a good bet may not be a good bet. I just don't believe a good bet. And the vanguard has to work on that thing. And again, there's no harm if you do it right. But I'm afraid, I'm talking about this for a minute, there's a lot of harm if you do it wrong. And most people seem to be doing the wrong. I can speak who is by their assets in this group are our other big competitors. Capital Group and American Plans. Fidelity, who does a lot of selling of the ETFs in its brokerage operation. And T-Roll Price, he says they're going to actively manage the ETFs. But what the point of an actively managing ETF is that beyond my comprehension, I can see speculating hour by hour on what the market's going to do, I guess. Well, what Brazil is going to do. But I can't see why you would speculate that way with an active manager. What happens hour by hour doesn't change anything. But any event, whatever will happen, it's not going to be a significant factor. Art, despite our low ranking there, we are basically shooting the lights at Vanguard for better or worse. In terms of cash flow, this year, so far, Vanguard has gone to... BlackRock has done 39% of the cash flow, State Street has 25% and Vanguard has almost 50%. How can that be? They had up to 113%. Well, the answer is that remaining group, largely speculative funds, has a minus 13% cash flow. I don't want to say that the numbers can trick you sometimes. And that's good. But some of the things out there, reverse things. I think just there are great marketing ideas, there are great ways to prey on them. You know, some investors, but are they good ways to invest those long-term? I just don't think that's even a marketing point, honestly. Look at the turnover, astonishing. I don't know how many things. 30% turnover is high. And you can just see for all these indexes, Brazil is kind of hot. Emerging markets are very hot. And the turnover just staggering proportions. Gold is high. And the highest turnover is 10 large. It's very clear that they're used for speculations and not used for investing. And you have brokers like to use or for investment factors. Somebody inspires and kind of, you know, they gamble on a very good day or they've all set a short position, that kind of thing. So they're going to enter into reality of ETF investing, a typical investor. But it's still a monster and all that. Raise the question to ETFs and investors. And the answer is, it doesn't look like it. I selected the extreme examples. But here's how the ETF did in Hong Kong, 9.8% here, the actual investor, and then ETF earned 0.5%, which is a lack of 9.5%. Global index, the ETF made 1% of the average investor lost 10. Merging markets bankrupt, the ETF did 12.2%. The average investor in our ETF did 2.8%. 9.5% of the points are in 25% of the profits. And when we looked at Royaling, it's known as one table of finding an example. A whole market. And you can see it's very consistent with the gap of 3 or 5, or 8 or 9 percentage points in annual performance of the 5 years gap that it and it just shows that it's working for the marketers but not so well for the investors. I should say that Kevin gave me a list of I think around 275 ETFs, these numbers 5 of them, 5 of them in shareholder returns that were low for returns of the ETF itself, the same as we're above at least 270 that had this lack in the shareholder returns 270 up to 175. And the 5 are probably funds that just aren't going anywhere. No one's buying or selling them, so it's very hard to mess everything up. So, I have a concern about ETFs. Now we have 16 of them in shareholder. I'll just mention briefly the new book, it's called Don't Count and we'll be there if we have a problem. We didn't want to betray my Princeton heritage. And you can, well we'll have copies for you there but I don't want you to be reading it during my speech this morning. I'm not going to be that good. It's a tome I don't want to go back to the previous one. The theme is basically under the carol of numeracy. But the subtitles, I'm going to give you another subtitle on the cover for the subtitle so you get a good feeling of what's in it. Of these 7 parts are the carol, what do we call it? Oh investment illusions is part 1. Part 2 is the failure of capitalism. Part 3 is what's wrong with the quote of mutual, quote of funds. Part 4 is what's right to the index. There's a surprise. Part 5 is entrepreneurship and innovation. Part 6 is idealism and the next generation. Part 7 is heroes and mentors. And it comes in at 587 pages so we're lucky getting it home. Check it out. If it wasn't so expensive as mail, I would have had Vanguard pay for it. Can't do that. And it's really an anthology. Most of the anthology stuff I've written over the years. It's an absolutely wonderful ford by Alan Blinder, a professor at Princeton. Well this is not basically numbers or real. Just tell us more about other values. We can count a lot of things. The things we can count are more important than things we don't count or can't count. We're waiting for the numbers to be absolutely crazy. We accept a basic value that we need to serve to see where the numbers come from. We're not allowed in Manhattan to do introduction. It's absolutely the tagger of capitalism and mutual money industry in this new system that we have, the agency system, which I mentioned. Where these corporations are owned 70% by agents of other shareholders. Hotline shareholders, 70% and very 80% by the end of the year. That ancient society goes on in the channel. For Alan Blinder, professor at Princeton, is wonderful. He wants me to do a new czar. Maybe we'll play for that. And I've got a great blur of the ball over. I really love it. I'm very involved in it. I've seen a lot of people for the last one. I'm sure I've already written one of the more outstanding art tables. I've been a songwriter very happy about it. And you'll see it during my presentation. I think I even came to work on the follows. So there's probably more reputation out of like that. But honestly, I just didn't have the energy to do that. So just close the room. Enjoy it as you can. And I hope you won't go ahead. Some of the stuff is going to come. And so then, that's enough for the book. There's one more time. Let's go to the painting markets. And I mentioned that probably some of the money managers do think a lot of it is about the financial problem we have now. And the fact that they've broken to donate in their own business. And they're speculating. They're buying or speculating for other people's money. And that's not a happy event for part of the financial system. And what we lost to focus on going to a focus on stock prices, going to a stock price, and that focus on transit for the diet, which is going to have a really long term. And, you know, a part of the fact that some people are able to buy it recently at these points, and Charlie Munger recently had a partner, Charlie Munger, and many other people, who divorced the book. We've got a system that's a mess. So forecasting the future is a very good thing. And I think we're going to be talking about that. Well, I can't work on that. Let's start by talking about the future of stocks and bonds and these incredibly speculative markets. I want to be very clear that how much speculative markets can matter anyway in this room. When you get that crazy crash, a flash crash, so-called, in May, what did it matter to us? And, you know, everything got back to normal. It didn't matter to a lot of people. I don't know if you've had open sale or something like that. And you do see a broker and he has other cash in the extended. But things come back to normal. And the long run in the long run, 100% of the returns that we get from stocks and bonds is created by corporate America, or government America, and goes to bonds. And that is the return that's available in stocks. The special development of that, where people are made higher up to be, has massive effects over years, and sometimes over decades, well over decades. But in the long run, it doesn't like that. I want to be very, very lucky. Jeremy Meyers out. And he is usually about the same thing as I was working in. So, he had the oldest noise. I said it in one of my quotes, I think it was a pretty good phrase, but of course I always want my own phrases. But the stock market, it turns out, is a giant distraction that this is an investment. And all it does is subtract that from the intrinsic factors created by corporate America. Sometimes stocks get way above that. And therefore, it's going well usually, it's going well tomorrow. And the price gets way ahead of intrinsic value. That's good for sellers, it's bad for buyers. When price gets way behind, intrinsic value gets good for buyers and bad for sellers. Because the stock market is a closed system. There's no advantage. And that, that, that. Except there's some potential for it to be lost. It's the stock market. It's the stock stock using that value grid in corporate America. You know, there's a lot of potential for valuation. Let's just take a fun, a funny old long user with these ideas. Well, first we'll start with the equity risk rating. And there are, and these careless that we've all gone through, where investors might say that's missing the backing board. And the original various links, there's no predicting the length generally at that date or more. And the dividend yield changed. That means the dividend yield didn't change by 5%. It went from 5% to 7%. And you're going to see those yields back in World War I in the 70s, 60s and 70s. And the yields were pretty good. It's 7% yields before that period. 6% in the 70s. And in 1974 it was very easy. The white stock's a lot because the yield was 6%. In 1974 the magnitude was pretty close to 7%. And so at the equity risk premium in the subsequent year it was very good. The yields were high. It was pretty consistent. The gross yield, I'll talk about this a little later, is greatly underestimated by most people over the market. So let's see if we can think a little bit of what the equity risk premium might be today. And I'll look here and see if the one in the back wants to go up. Yes. And that's stock's lying on by 6%. So what don't you think about the coming decade? And even the last 100 years, what would you have to do with that yield? And you can see that the speculative return has changed quite a certain ratio. It's changed to a price range ratio annualized between almost nothing for the last 100 years. And we have a return of 9.6% and the last 25 years. And the speculative return would be 10, 20, or 40. And then back to about 8k in the world it might be today. So it's still true to the market that you invested in the last 20 years. But you can see that the forward earnings growth is 5%, 6%, very similar to the net yield in the West in the second period, 3.5%, very important in that respect. So we need to have contacts with what we're facing in the future because that's what's going to dominate your returns. As I look at it, the next 10 years is just about 2% today. Not very big but twice what it was in 1990, not really good gas. And I think earnings should grow about 6% because that's perhaps what the nominal growth rate for our economy is. And earnings forecasting for a decade is really very easy and obvious like everything else I do. And then as the forward earnings grow, they're ready for our economy. And they're very able to charge a remarkably stable number of forward earnings. Sometimes they average 6% in GDP and sometimes they're as slow as 4% sometimes as high as 8% or even a little higher. But they stay in that narrow channel, consistently. There's no slope of forward earnings share or GDP. It's a shared GDP on growth. And so we would expect that we should have a lucky amount of forward earnings growth. And I think my idea of growth in the long run was right as the phrase was kind of widespread, except it's an option many years long. But it's a good way of looking at things. And that's assuming for me. So if we get 60% earnings throughout that 2% dividend yield, that's 8% fundamental investment there. And I think the PE ratio, nobody really knows what it is today because there's so many different ways of looking at earnings for the problem. And if I think native PE will reduce that by 100%, turn it into about a 7% or probably 8% of the 6 plus 2 minus 20% and the inflation thing is working on 7. It's that top line is 8% and 7. But to assume in a future inflation we're at 2%, probably going to be low. But to assume you're inexpensive 2.5%, most of the sources of equity returns over on all that you're going to get used to that with your parents. And the average investor who isn't conscious of the expenses to say nothing in taxes which I'm going to worry about here is going to have 2.5% of your return in the decade. It's going to get better the expenses out of the iteration more so now than ever. The bond yields, the bottom line is that and we know the bond yields have a high correlation of 91%. Today's bond yield is a high correlation. People forget these things, they're so obvious. But today's bond yield is a 91% correlation for the return of bonds for the next decade. 91%. And so we can look forward to bonds as yielding around 5%, that's probably a little high. The high rate for us in the next decade. Trash is 3.8% low on the intermediate term, 2.4%. The intermediate term, 2.25%. And we don't see a low return with a 5-year tip which I think today is at 0%. Not a very generous return. One might say. So when you look at the sources of use that are being made up here, there are a lot of bond market. And the bond market gives 3.5% which is about what that package of bonds will do. So if you want to be able to bond and fill this bond cost for the amount that is there, and take out 100% for expenses in the order of cost probably, and that needs to be 100% for the bond cost. So if you were meant to be able to work on it ever before, to be conscious of the cost of the huge bonds taken out of your return. So the is a very, very difficult time. And there is no way, a little place in the mind that you've never seen a bond market. So it's very difficult to work in the best constituent that you've ever seen. So if you go into the reference on the bonds or some tarot, in fact that was one of about 3.8% for the premium, the 3.8% for the period of 7%. But still, stocks at 7%, we all know, are like 100% of money over that age. And at 3.8%, we've got about 50% of money over that age. So stocks, soon we don't have some kind of disaster. So the big assumption of the is for a much bigger contract to be able to change the bonds of that bond stock since that kind of bond is small, it exists of course. So finally, oh I should say this, I don't want to ask you about this anymore. I think we're going to have a flame in you, and you seem to have been really on Catalan arms out there. We didn't get what you were saying. And so we're optimistic about it. But I am. It's not that much to say. I might have said too much. I know that you don't want to ask me the same thing. And there's a bond market that's been at 4% of the most probably, and that's okay. In terms of equity's age, and I don't think you can ask me about this. But I hear we're on the list of any kind of money quality thing. I don't believe that when you look at money quality, it is fairly flawed. For instance, the past doesn't work out the future. The second one is that they shield the different nationalities that many of the people of the United States are. And also if you look at those long-term things, we've got both companies, and Blacks companies, and Boos companies have dominated the market pattern in the century. It's just different. And so the numbers really have to be incredible. They don't even mention the black and white. So you might ask if you want to come and just go ahead and come to a convention. That should have been an ideal decision. I think they're using the most probable. They have a lot of large-range probabilities. The most probable is 10 to 12% return on the stocks. And I'm going to see if you can find that and we'll pick that up. Show me in here. Turn that page. Go ahead. This is a difficult time. And huge risks for our economy. Huge risks in our financial markets. Bonds are growing. I think one of the things I believe is be cautious. Be cautious. Knowing that I'm not always right. And I may be wrong. But I don't want to give a 100% bond to my annual portfolio. I can change the allocation. 15, 16 years. I can change the forming of bonds as much as possible in the best way. Or 60% more. I'll give it some family accounts. There are probably 50-50 stocks in bonds that I have to worry about myself. And so I need to be cautious. or returns. Their most probable returns are 80-12%. The 25% probability of 18-12% returns is very high. And they have actually a 22% probability of 12-16% return. A 10% probability of 16-20% and a 5% probability of more than 20%. Well, I don't know what numbers they're looking at. I mean, if you want to get a 20%, we're not going to tell you what you need to do. You start with a 10, and you know that we know that it's 3%. 18 to go, right? Is that right or wrong? We're roommates. I'm wrong at 6%. Organizers are going to go faster than you, and it's going to go 8. But 10 to go. We're getting 10% points for today's PD and 18. 10% points a year. The 18, you have to go back to 100. Tell me that then. I think we have to go 100. So, how can there be a 5% probability of that happening or a 15% probability of that? I just don't get it. I don't mean to put it aside in any way. I'm not going to put it in any way. How can we ever, for what it's worth, get a projection of international returns? I'm not sure if you have an idea of what it's going to be. It's exactly the same as a projection of U.S. returns. It's Saturday at 12. Close to U.S. ranked by 4. It's 8, 12, 16, and so on. Lesson 3, okay. What are the 20% returns? I don't think it's a good one. And it's the math. It's the math, student. It's not the ones with the math. And so, the returns are the same. I have to say, I'm a little bit wondering about one of the options. I'm going to figure out what to do. I'm going to say international. But they are the same. I don't know if they're right or wrong. They're probably right. International returns will be more or less the same as U.S. returns. I don't know that. How many of you know that? But we recently updated the international position on our target funds and so on. About 50% numbers. Yeah, we took it in one of the funds. 70 marks in aggregate position. And we took U.S. 60 to 52. International from 15 to 25, 23. So that's 30% in U.S. stocks. If we're doing it in party, it's a 50% increase in international stocks. You might ask that. I don't think this is going to change the way it really is. I asked them, why did they do that? It doesn't really, it doesn't say. But it says, the time is not really helpful. If I go into international, it will reduce the home bias of the funds. It's not what international will do. I think so. Come on, I hate commodities. I'm sure it's going to stall it. Because commodities have to be overturned before they're going to stop. I don't know if that's right either. But a commodity is something that's commodity funds. A commodity is something that's commodity funds. But the whole sum is important to pay for. It has, if you're reading my stuff, no internal rate of return. So if you look at the 100-year history of gold, it's a terrible investment. Not going to be other ones. Because if you're competing over 100 years with a 5% or 6% return on stocks and funds, whatever it is, 8% stocks and 5% on a bond, whatever the number is, you have that to build up your end of the year. There's nothing like that. Rank, speculation. And so, of course, it's gold. And gold is down in an area, and I won't stand by gold, but I won't. It just seems to be going up and up and up, and then you get that kind of momentum. And it's going to be a stock rate of 5% at last. When you all house the gold or something. And so, you know, I don't think that's, you want to play a little bit of a 2% or 5% even if you're asset. It's a game. We'll have to say, well, what do I do with it? And then hedge funds, some of them will work. Some of them won't work. And usually there are returns that we wrote in my boss. And I wouldn't add that if they didn't talk to the hedge fund. And the worst thing I see in the game is the full amount of the hedge fund. Things that are asset management funds, whatever it is, what's that marketing digital fund, where the hedge fund is going to go. Oh, and into the, it's the most surprising into those funds with 3, 4, 5%? No. I'm going to just turn it off. Manage payouts are 3, 5, 7. And I don't believe in funds that put percentages in their name. It should be very clear on that. I think it's in German this week. And 7% in a certain way. I'm sure one of you is like, whatever capital I believe. And the departments have a high content of 3, 5, 7. And 1, 3, 5, 7, 9. So the department of some funds have, when they have 2% of interest rate, 1, 3, 5, 7, 9 becomes 3, 5, 7, 9, 11. Right? It's a mad student. Again. And they're all zero. So they don't seem to be an easy way of doing this. So I'm going to stick down and it'll be great for them. I'm also worried. I don't understand this too much. I'm a little worried about not just financial system and general worries about it, but the risks that lie out there that are, we haven't really thought much about it. Last one. The global world is a very different world. The US financial system is a mess. Our pension fund system is technically bankrupt. The state of local corporations are using an 8% return for a state loan for R2. And I don't see where you're going to get 8%. I'm worried about that. It's thoughts and bonds, yielding maybe 5. And for the most kind of firms, we get a point of cost that's more than what we have before we go. And the Wall Street values, such as the NAB, are in the tatters, the national disgrace, and his compensation was on, on, on, on. It's really quite significant. And we do another thing I'm worried about, and I think are, you can easily argue that the current is worth a million dollars. So the political situation shambles. And, you see, heads are so secondhand, and unfortunately, I will be the happiest guy in the world election night. I mean, they heads are just in stress, and it comes from both sides. But, we do well something. We do well something. Our values. And, I'm, I'm going to do my best to bring it back to the financial system. So, I know you already think about my work. But, I find a lot of residents want to see residents want to see what their values are. I think a lot of people, young people, who are really looking at something, at something higher, something older, are really meaning that. And, in these remaining days, I'm going to do a pilot today, but I don't have a day. I'm going to do my best to see, like, a negative, any difference in this vast world in which the defendant gets back to a more nobler position in society. The financial system works for all of you, and not for all three, all of you, and all of our investors. And, I'm going to just work on it and see if I can prove the best of my ability to bring truth to the van that I have put on our worst response to the van garden for all of the years to come, even when a person can make a difference, and they get a little tiny difference, and they go through this without a doubt.