John Bogle this week spoke with conference attendees at a Morningstar Investor Conference.  He touched on two items of note--one bad, one good:

• The bad: creation of a “federal standard of fiduciary duty” for all money managers because a number of mutual fund managers are “taking advantage of their position” and not looking out for their shareholders.  Federal regulation is never the answer to problems in the market, Mr. Bogle
   
• The good: Don't move away from a buy-and-hold philosophy.  Following a buy-and-hold strategy has worked well for many investors, Mr. Bogle said. The alternative — market timing — is far too risky, he said.  “The cost of trading is too much,” Mr. Bogle said.

Just a quick Friday afternoon update from one of our favorite investors.

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There's been a buzz going around this week that some Democrats on the Hill and even in the Obama White House are looking at a value-added tax (VAT) to pay for government-run health insurance.

You can read more about this at ATR.  They also cover how this trial balloon was floated before by Bill Clinton back in 1993, and how VAT rates have risen over time with our major trading partners.

What's been left out of most of the analysis has been the impact on shareholders.  At first glance, there wouldn't seem to be one.  VATs are embedded in the price of a good, and ultimately paid for by the retail consumer.

However, a VAT is merely a very efficient consumption tax on corporate products.  As such, the tax wedge should have a similar impact to that of the corporate income tax (that CBO has said about a third of which is paid for in the form of lower returns to capital).

A VAT will raise the price of goods, and thereby hurt sales.  It's a safe bet that about 30% of any new VAT tax will be paid for in the form of lower share prices and reduced dividends.  That hurts everybody who has a 401(k) or an IRA, not just direct owners of companies.

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Supreme Court nominee Sonia Sotomayor might be a good legal mind, but she has very little skin in the game of the U.S. economy.

According to Politico, Sotomayor does not have any investments in IRAs, 401(k)s, or taxable brokerage accounts.  What she does have is a checking and savings account balance of between $50,000 and $115,000 at Citibank.

One of the key questions a court appointee faces is their take on business legal decisions.  How can the next Supreme Court justice not even have experience with an IRA or a 401(k)?  Does that even happen anymore?  This is the 21st century.

Don't expect Sotomayor to have authentic shareholder interests at heart if she does get confirmed.

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Congress Daily PM reports today that the financial services sector (SIFMA, ABA and the Financial Services Roundtable, in particular) are still making a push for five-year net operating loss carryback for their industries.

Companies receiving TARP funding (including many financial institutions) are barred from using a 5-year NOL carryback rule (they are stuck with a 2-year carry-back).  Even if a company didn't receive a bailout, they are ineligible if their revenues are more than $15 million.

More to come on this as it continues to develop.

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Welcome to the new site of American Shareholders.

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Executive Director Ryan Ellis today was a featured panelist in Washington, DC hosted by America's Future Foundation. The panel, entitled "Is There Such a Thing As A Bad Tax Cut?" was held at the Fund for American Studies near Dupont Circle.

The video feed should be up soon, but in the meantime, here's what I went over:

•   To answer the question, "no," there is no such thing as a bad tax cut. All tax cuts deprive the government of revenue, which is a good thing. Some tax cuts (e.g. cutting the capital gains tax rate) are better than others (e.g. the ethanol tax credit). But no tax cuts are "bad"

•   Some tax cuts are actually not tax cuts at all--they are spending. One-third of income tax filers don't have an income tax liability. 15 percent of filers have neither an income tax nor a payroll tax liability. It's arithmetically-impossible to cut taxes for these people. Instead, they receive a welfare benefit called a "refundable credit" which even the government scorekeepers admit is spending

• The most effective tax cut right now would be to cut the top corporate income tax rate, which is tied for highest in the world with Japan

•   The best thing that could be done for investors right now is to provide some certainty that the capital gains and dividends tax rate of 15 percent will be there permanently

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