<div> <blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid">[AN said] </blockquote> <div><br>There's a lot stuff flowing up with no return, but I<br>will note that honest management fees on mutual funds<br>involve the provision of real services, investment<br>analysts doing work the investors won't or can't do, <br>assembling bundles of securities, watching them,<br>buying and selling at the right time, etc. That's real<br>work. Likewise a guide to take you through the<br>bureaucracy is certainly providing real services.<br>  </div> <div>SA: um, well, where those conditions are present, ok. But the work of guys do is often riddled with conflicts and so the measurment of "honest value added" versus "self interested work" is wayyy difficult to measure. And who measures? Canadian rates are on average 100-150 bps higher than in the US. It's just a Northern premium. Folks just tip tax-deferred amounts into their individual accounts every year at tax time, and for what I am guessing is the vast majority, don't even know what fees are involved where. </div> <div> </div> <div>And quite apart from this, what value gets added? These guys -- as the dartboard example shows every year -- can be no better than chance. Pardon the appeal to authority, but Maynard, old dog, said, </div> <blockquote> <p>The vast majority of those who are concerned with the buying and selling of securities know almost nothing whatever about what they are doing. They do not possess even the rudiments of what is required for a valid judgment, and are the prey of hopes and fears easily aroused by transient events and as easily dispelled. This is one of the odd characteristics of the capitalist system under which we live, which, when we are dealing with the real world, is not to be overlooked. (Collected Writings, vol. VI, p. 323). </p></blockquote> <div>There are problems when management or service fees<br>are inflated because there's no real competitive<br>market to set objective standards -- in a paper I am<br>writing I am arguing that this happens a lot with <br>class action plaintiffs' attorney's fees.</div> <div> </div> <div>SA: I would be deadly interested in this paper if you can share it, or when and if.</div> <div> </div> <div>(Never mind Enron or Prudential-Bache style outright theft and<br>fraud.) Another problem is when executive compensation<br>goes through the roof when there is no evidence that<br>this contributes to profit, shareholder value, or <br>accrues in any way to the benefit of the company,<br> </div> <div>SA: Or M&As that have the same effect, or the whole damn capital market, which appears to be useful mainly for re-arranging ownership patterns, cashing out those at the top, and smoothing the way with the juicy transaction fees that go along with those transactions... </div> <div><br>But the real exchange of something for nothing is the<br>return on investment due to mere ownership, which adds<br>nothing to value of a good or service and is merely an<br>entitlement to an income stream. And that is nothing <br>new,it is as old exploitation itself.</div> <div> </div> <div>SA: Amen. I have FTD enough today...<br>-- <br><a href="mailto:simon.archer@gmail.com">simon.archer@gmail.com</a><br> </div></div>