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What's Wrong With Jack Bogle's Stand On ETFs

At one time I was an investor in Wal-Mart stock ("Wal-Mart's midlife crisis," Cover Story, Apr. 30). I sold my position over a year ago after continued disappointment in the performance of the stock. Certainly, the current missteps that Wal-Mart has taken the past year are part of the reason for such lackluster performance. But one only has to visit a typical Wal-Mart Supercenter to realize that a much more persistent problem exists. The entire experience is so excruciating, I will not even consider Wal-Mart as a place to shop anymore. Fortunately Target (TGT) is opening a store nearby. Ironically, it has built its new store at the same location as the old Wal-Mart. I will be one of Target's better customers once they open.

Michael Erb

Camillus, N.Y.

Your Wal-Mart story was heavily slanted. In my area, Wal-Mart (WMT) has three huge stores open 24-7, and all of them have five times the number of customer cars found in competition parking lots on any given day.

Andrew Welden

Little River, S.C.

Senior management that is not close to the customer does not recognize the problem. Trying to attract new customers by adding the same products that the competition offers does little to solve the problem, as Wal-Mart found when it tried to add cheap-chic apparel. The answer is to become aware of customer needs at the store level and give store employees more control in selecting and stocking products that customers are asking for. Senior management should spend more time in the stores talking to employees and customers. Customers may be attracted to a store by low prices but will remain loyal only if the store can meet the customer's needs.

John R. Moody

Hudson, Ohio

The thing that is missing about these kinds of reports ("Ethanol is not the only green in town," Environment, Apr. 30) is the fact that subsidies for agriculturally based alternative fuels are, first and foremost, farm subsidies. If government truly wished to create more alternatives to gasoline, it would not place restrictions on the importation of ethanol or sugar (which could be used to produce ethanol and which sells on the world market for half the price of domestically produced sugar). Even if this were done, the net effect might not be positive, since it would drive up world food prices.

For the foreseeable future, nuclear energy and fossil fuels are the most viable ways to secure our energy needs, and developing those supplies should be our primary focus. Unfortunately, the volume of media attention given to ethanol and other biomass-derived fuels helps to create the false illusion among the general public that these are viable alternatives to oil. The ethanol bubble will burst, hopefully before too much damage is done to the economy. Sadly, we'll almost certainly be stuck with the subsidies. Rarely does the government get involved in the "free" market without throwing sand in the wheels of the economy.

Gary D. Jones

Rainbow Separations Ltd.

Belvidere, Ill.

John C. "Jack" Bogle has done well by retail investors. But his arguments against exchange-traded funds ("What's wrong with ETFs?" Personal Finance, Apr. 30) and non-market-cap-weighted indexing strategies do not provide the full picture, nor do they account for the fact that throughout the history of the financial-services industry, innovation has been inevitable. While innovation is not an end in itself, it has often resulted in products or services that are incrementally superior to those that came before them.

Adam S. Patti

CEO, IndexIQ Inc.

Rye Brook, N.Y.

With all due respect to Bogle, he makes a crucial error in his judgment of exchange-traded funds. I agree completely with Bogle's assertion that an investor who is putting a certain amount of money each month (dollar-cost averaging) into an investment plan will not be better off using ETFs. Using an index fund in that case would be a better choice to avoid the transaction costs that are associated with buying an ETF. But to make a blanket statement that ETFs are "wrong" is a little self-serving. Bogle's genius is, and will always be, the flagship Vanguard funds. That does not mean they cannot be improved upon for a certain class of investors. ETFs fill the area where funds on international indexes are nonexistent.

I have built my business using ETFs and no-load mutual funds side by side, but to say that one investment style is flawed, especially when the statistics do not back up that view, is wrong in itself.

R. Dustin Doyle, President

Cornerstone Capital Management

Camby, Ind.

"Arbitration aggravation" (News & Insights, Apr. 30) states that discovery is bogging down arbitration cases and driving up their costs. In reality, all parties who enter into arbitration proceedings with the American Arbitration Assn. (AAA) can contract for limited discovery proceedings. Your article also suggests that arbitration is too costly. The AAA offers several options to allow its customers to control the costs of their arbitration cases, including limiting the number of arbitrators presiding on a case, offering expedited procedures, and even allowing for the entire process to be conducted over the Internet to cut down on travel and correspondence costs.

The article also suggests that arbitration is increasingly becoming a less popular form of dispute resolution, with more businesses opting for litigation and arbitration numbers dwindling. In reality, the number of commercial arbitration cases filed with AAA rose in 2006 from the previous year, with almost a 9% increase in cases involving claims of $1 million or more. Specifically, from start to finish, these large, complex cases are typically resolved almost a year faster than the average time of a federal court case. Generally, the median time frame from filing to award of AAA commercial cases is fewer than 10 months. Additionally, year upon year more than 60% of all AAA arbitrations settle by virtue of having the process in place either before a panel of neutrals is convened or prior to a hearing.

William K. Slate II

President and CEO

American Arbitration Assn.

New York

Rudy Giuliani says, "I can't remember in the history of war when an army...has announced its retreat...and a timetable of that retreat" ("Rudy Giuliani on Iraq, taxes, mistakes," Face Time, Apr. 30). He needs to read recent modern history.

The British faced a somewhat similar predicament in India after World War II: intense agitation to leave the country, attacks on forces, civil unrest, and—most importantly—infighting among the Indian factions. Lord Mountbatten, the last Viceroy, ordered a "retreat" in early 1947. He advised British forces to leave, no matter what the circumstances, no later than June, 1948 (an 18-month timetable). Amazingly, the Indians suddenly became very focused on the need to resolve their differences and to effect control of their own country. The British were then able to exit with dignity within nine months (August, 1947). Of course, a large measure of turbulence and bloodshed did follow, but the Indians ultimately addressed it and now have a modern nation.

The parallel is obvious. Iraqis ultimately need to resolve Iraq's problems. They have no incentive to do so if we remain as both whipping boy and crutch. Announce our departure, and they will focus on what they need to do.

James M. De Francia

Aspen, Colo.

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