Enough: True Measures of Money, Business, and Life

As noted earlier, money managers—led by the giant global financial conglomerates that dominate the industry (those conglomerates now own 32 of the 50 largest fund organizations, and another nine firms are publicly owned)—hold as their highest priority the return earned on their own capital, rather than the return earned on the capital they are inve

My inherent resistance to shortcuts was greatly amplified by a hard experience as a police-beat reporter for the old Philadelphia Bulletin. In 1950, while working at a summer job, I got a call from the news desk to cover a house fire that was two trolley rides away from my location in a firehouse. (I had no car.) It was about midnight; I was tired

If there were a single phrase that best articulates the attitude of business leaders and managers who both deserve and reward a great workforce, it would be “press on, regardless.” It is a rule of life that has been a motto of my family for as long as I can remember, and has sustained me through times thick and times thin alike.19 The motto’s prove

In 1955, when the total market capitalization of the S&P 500 Index was $220 billion, neither futures nor options that would enable market participants to speculate on (or hedge against) the price of the index even existed. Then index futures and options were created—a marketing bonanza for the financial field. These new products made it easy no

It’s my conviction that those of us who do engage in business and financial careers carry a special burden, for it is in business and finance where most of the people in our society make the most money. Yet money itself can easily deceive us about what we do and why we do it. As René Descartes reminded us four full centuries ago, “A man is incapabl

Let’s start with the costs, where it is easiest to see through the haze. Over the past 50 years, the (nominal) gross return on stocks has averaged 11 percent per year, so $1,000 invested in stocks at the outset would today have a value of $184,600. Not bad, right? But it costs money for individuals to own stocks—brokerage commissions, management fe

A simple example demonstrates that speculation is a loser’s game. Assume that one-half of the shares of each of the 500 S&P stocks are held by investors who don’t trade at all, and the other half are held by speculators who trade solely with one another. By definition, the investors as a group will capture the gross return of the index; the spe

What I call the speculative return—the annualized impact of any increase or decrease in the price-earnings (P/E) ratio or P/E multiple—happened to be zero during this period, with investors paying a little over $15 for each dollar of earnings (P/E = 15) at the beginning of the period, and about the same at the end. Of course, changes in the P/E can

Over the past half-century-plus, the fund business has turned from stewardship to salesmanship, from managing assets to gathering assets. We have become largely a marketing industry, engaging in a furious orgy of product proliferation. Our apparent motto:“If you will buy it, we will make it.”