John C. Bogle, Founder and former chief executive
The Vanguard Group
The Asset Management Performance Summit
TradeTech USA 2008
New York, NY
March 3, 2008
These are turbulent days in the financial markets, and market participants are looking for answers about what they should do. So I’ve taken the liberty of modifying the speech title given on your program—“Fair Dealing with Investors”—and will speak more broadly on “Investment Strategy in Times of Market Turbulence.” It must be clear that the philosophy of this ageing “indexer” is not exactly aligned with the philosophy of many of you on the “Buy Side” at this TradeTech gathering, but perhaps we’ll find some common ground.
In trying to respond to questions about strategy in times like these, I begin by saying that the answer depends upon just who it is that is asking the questions. If the questioner is a speculator, buying and selling stocks with the focus on their momentary prices, a trading strategy that is hard on the instincts and on the emotions—involving guesswork about how other investors here in the U.S. and around the globe will respond to unpredictable volatility in the world’s stock markets—I’m not sure that I have the credentials to provide advice. But if I did, I’d tell that person—as I’ve been saying since early August when the U.S. market reached its high—“Get out. And stay out.” At least until the markets settle down a bit. (Of course, I have no idea when that might be.)
If, on the other hand, the questioner is an investor, holding a highly-diversified portfolio of both U.S. and global stocks, balanced with a healthy allocation to bonds appropriate to one’s age, wealth, and risk tolerance, I’d tell that person, as I also did last summer: “Don’t do something. Just stand there.” Or, perhaps more graciously, “Stay the Course.” Stay the course because successful market timing is nigh on impossible, and over time the productivity of our corporate enterprises will create value. Put another way, I believe that ten years from now, earnings in the S&P 500 will be a lot higher than they are today.
Basic Values and My Princeton Thesis
I’ve thought about the distinction between speculation and investment for a long time, in fact, going all the way back to my 1951 Princeton University senior thesis. Selecting mutual funds as the topic for that thesis turned out to be a happy turn of, well, fortune. For it was late in 1949 that I stumbled upon the December issue of Fortune magazine and learned for the first time that something called “the mutual fund industry” existed. When I saw the industry described as “tiny but contentious,” I knew immediately that I had found my thesis topic. It was titled “The Economic Role of the Investment Company.”
Since then I’ve experienced at least three major bear markets, each of which was followed by a rousing bull market that would ultimately more-than-erase those painful but often short-lived losses. This experience has only served to confirm the basic values that I continue to hold about investing, formed during my study of Economics in college more than a half-century ago.
The conclusion of my thesis powerfully reaffirmed the ideals that I hold to this day: “The principal function of investment companies is the management of their investment portfolios. Everything else is incidental.” The role of the mutual fund is to serve—“to serve the needs of both individual and institutional investors . . . to serve them in the most efficient, honest, and economical way possible.” Put in the language of the preliminary title of these remarks, the fund industry should be all about “fair dealing with investors.”
This gratuitous advice about efficiency, honesty, and economical operation has been, as we now know, all too often ignored by the fund industry. But the creation of Vanguard in 1974 as a truly mutual mutual fund group—operated on an “at cost” basis, for the benefit of its owners rather than its managers—was my attempt to walk the walk that I had talked the talk about nearly a quarter-century earlier.
Read today, my thesis would probably impress you as no more than workmanlike, perhaps a bit callow, but above all, shamelessly idealistic. But it did put forth two ideas that proved significant, and in retrospect rather prescient. The first idea was the index fund. After analyzing mutual fund performance, I concluded that “funds can make no claim to superiority over the market averages,” perhaps an early harbinger of my decision to create, nearly a quarter-century later, the world’s first index mutual fund. Originally referred to as “Bogle’s Folly,” Vanguard Index 500, with some $180 billion of assets, is now the largest mutual fund in the world.
I continue to believe that owning a portfolio that holds all of the corporations that comprehend the U.S. stock market, albeit with a global flavor—at, of course, the lowest possible cost—is the only strategy that guarantees that an investor will capture his or her fair share of whatever returns the stock market is generous enough to deliver. (Ditto, but even more so, for the bond market.)
The reasoning, of course, is straightforward. Investors in the aggregate must earn the market’s return. But only before the costs of investing are deducted. After that deduction, investors must lose to the market return by that amount. So the lowest-cost provider of equity and bond portfolios inevitably provides returns that exceed the returns earned by other providers in the aggregate. That difference is large, because fund management fees, operating expenses, trading costs, sales loads, and taxes take a giant slice out of returns. Holding these costs to the bare-bones minimum, I argue, is the key to investment success.
Of course, this mathematical truth about the returns earned by investors as a group won’t come as good news to stock traders. But there is a middle ground. As Brian Cartwright, general counsel of the SEC, noted in a recent speech, “an actively-managed mutual fund can be viewed as just a combination of an index mutual fund and a virtual hedge fund, resulting in a heavily-traded small component and a barely-traded large component,” along with “eye-popping” savings for investors in fees and expenses. Only time will tell whether this intriguing concept of seeking excess returns (“Alpha”) finds acceptance.
But I’d recommend skipping the search for the Holy Grail of Alpha. For me, indexing represents the Gold Standard of investment strategy, and it has come to permeate the field of investing. Index strategies now account for some $3 trillion of the $15 trillion value of all U.S. equities, and bond indexing and international equity indexing account for another $1.5 trillion of indexed assets—nearly $5 trillion in all. Indexing, indeed, has become a household word, recommended by the likes of Warren Buffett, Paul Samuelson, Yale’s David Swensen, and virtually the entire academic community.
Investment vs. Speculation
The second significant idea in my thesis was drawing a clear distinction between investment and speculation. In making that distinction, I relied on the definitions set forth by John Maynard Keynes in his remarkable book The General Theory of Employment, Interest, and Money, published in 1936. (For any serious participant in our financial markets, Chapter 12, “The State of Long-Term Expectation,” remains essential reading, even today.) He made a clear distinction between enterprise and speculation, defining“enterprise” as “the activity of forecasting the prospective yield of assets over their entire life.” He defined “speculation” as “the activity of forecasting the psychology of the market. . . . (This) battle of wits to anticipate the basis of conventional valuation a few months hence does not even require gulls amongst the public to feed the maws of the professionals—it can be played by the professionals amongst themselves.”
Keynes freely acknowledged that enterprise could not be based on an exact calculation of benefits to come. (Indeed, he explicitly acknowledged the extremely precarious nature of such forecasts.) Enterprise can only flourish if accompanied by “a spontaneous optimism, an urge to action rather than inaction,” which he famously described as “animal spirits.” In any event, he worried about what he considered as the inevitable dominance of investor psychology in the markets. Indeed, he considered as an alternative “making the purchase of an investment permanent and indissoluble . . . except by reason of death or other grave cause might be a useful remedy for our contemporary evils.” (It turns out that’s not so far-fetched; it’s precisely what an index fund investor is supposed to do.)
Keynes used no numbers to make that distinction between enterprise and speculation, but in the late 1980s, I did exactly that. Echoing the inspired wisdom of Lord Keynes, I defined investment return as the sum of the current dividend yield on stocks plus their subsequent rate of earnings growth, together representing the return that corporations earn on their capital. I defined speculative return as the impact of the change in the number of dollars that investors are willing to pay for each dollar of corporate earnings; that is, the annualized percentage change in the P/E multiple. Simply add the two categories of return together and, viola! we have the total returns generated in the stock market. (It works!)
Over the very long run, it is the economics of investing—enterprise—that has determined the total return on stocks. The momentary emotions that surround investing—speculation—so important over the short run, have ultimately proven to be virtually meaningless. Too often, I think, we in the financial community—whether we are investors or traders—focus too heavily on the short-term disparities between investment returns and speculative returns, and far too lightly on the necessary long-term coincidence between these two very different components of the stock market’s total return. In fact, their long-term returns on the two have been almost identical.
For example, (Chart 1) the 10.0 percent average annual return on U.S. stocks during the past 100 years is almost identical to the 9.9 percentage points of investment return, an average dividend yield of 4.6 percent, plus average annual earnings growth of 5.3 percent. Speculative return added only one-tenth of one percent to that total, the result of an inevitably period-dependent upsurge in investor confidence, reflected in a small increase in the P/E ratio from 15 to 16 times. Despite the transient booms and busts of stock market history, for the investors who have stayed the course, buying and holding a portfolio invested across all of American business, has been an extraordinarily successful strategy.
Of course significant disparities occurred along the way—periods when stock prices get ahead of business fundamentals, and periods when they fall well behind. These gaps are greatly clarified when we look at the ratio between the two returns on a cumulative basis, which clearly reveals what the first chart conceals. (Chart 2) Note first that on the high side, as in 1929, 1972, and 1987, cumulative returns on stocks sometimes reach 150 percent of business returns—a warning sign—and on the low side, as in 1917, 1945, and 1974, sometimes fall as low as 50 percent—a sign of opportunity. The sole exception was the biggest bubble in history—the “New Economy” bubble of the late 1990s, when the cumulative market return soared to more than 350 percent of cumulative investment value, only to retreat to about 120 percent by 2002, where it remains today—historically, very high. But maybe, just maybe, “this time is different.”
Mutual Funds Ignore the Lessons of History
Yet, focusing on investment rather than speculation is conspicuous by its absence from the agendas of most actively-managed mutual funds. Fund managers continue to trade their portfolios with alacrity and vigor. I didn’t expect this to happen. Indeed, in my thesis I predicted that, in a much larger mutual fund industry, professional investors would come to focus on the wisdom of long-term investment rather than the folly of short-term speculation. (I was surely right about the industry’s bright prospects! The $2 billion industry of 1951 is today a $12 trillion behemoth.)
This line of argument was directly contrary to what Keynes believed. In General Theory, he observed that, “in one of the greatest investment markets in the world, namely, New York, the influence of speculation is enormous . . . It is rare for an American to ‘invest for income,’ and he will not readily purchase an investment except in the hope of capital appreciation. This is only another way of saying that he is attaching his hopes to a favorable change in the conventional basis of valuation, i.e., that he is a speculator.”
This callow college student took Keynes to task. Defying his opinion that professional investors would join the ignorant crowd of stock traders, rather than engaging in short-term speculation focused on forecasting the psychology of the stock market, mutual funds, I argued, would bring far greater focus on wise long-term investment. I predicted that fund managers would behave as “steady, sophisticated, enlightened, and analytic” investors, focused on enterprise—on corporate performance and intrinsic value—rather than momentary and evanescent share prices. I was wrong.
As it turned out, my confidence that mutual funds would focus on the wisdom of long-term investment and eschew the folly of short-term speculation was sadly idealistic. Rather than fund managers behaving as “steady, sophisticated, enlightened and analytic” investors, far too many managers turned out to be quite the reverse: “volatile, unsophisticated, unenlightened, and superficial.” Indeed, I have often said, after Oscar Wilde’s definition of the cynic, that our industry’s security analysts too often “know the price of everything, but the value of nothing.”
But during my first 15 years in this industry, it was not that way. Fund turnover averaged about 16 percent per year—let’s call that “investing”—and never varied significantly from that norm. (Chart 3) But turnover moved steadily upward, and in the past decade, has averaged nearly 100 percent per year—let’s call that “speculation”—exactly the opposite of my naïve prediction all those years ago.
But it is not mutual funds alone who are engaging in this inevitably counterproductive trading behavior for investors as a group. They are reflecting a trend toward speculation that has been growing since the mid-1960s (Chart 4).1 Total turnover on the New York Stock Exchange was also less than 20 percent through the mid-1960s. Even by the mid-1990s, it rarely exceeded 50 percent. But in 2007, stock turnover exceeded 200 percent per year. That number soars to 280 percent if we include the trading in exchange traded funds (ETFs). Clearly, the nature and character of our equity markets have changed. We are in a new era, one with the highest speculation component in history.
When our market participants are focused on the economics of business, the underlying power of our corporations to earn a solid return on the capital invested by their owners is what drives the stock market, and volatility is low. But when our markets are driven, as they are today, by speculation, by expectations, and by hope, greed, and fear, the inevitably counterproductive swings in the emotions of market participants—from the ebullience of optimism to the blackness of pessimism—the resultant volatility is almost certain to lead to the kind of turbulence we are now witnessing.
The Age of Turbulence
To be sure, every era has its times of turbulence and its times of stability and growth. But so far the 21st century, our new millennium, has begun with turbulence riding in the saddle of the stock market. Indeed, no sooner had the year 2000 begun than the stock market began to tumble from a (admittedly, highly inflated) level of 1,520 on the S & P 500 Index. Before it was over, in October 2002, the S&P had plummeted to 770, the bottom of a bear market in which fully 50 percent of the value of U.S. stocks had been erased.
Five years later, in October 2007, the S&P 500 had more than recouped the lost ground, up 103 percent to 1565. (A reminder: down 50 percent and up 100 percent nets out to a return of not plus 50 percent butzero. Do the math!) Since then, stocks have tumbled to 1300, a 17 percent retreat, still short of the 20 percent dip that Wall Street defines as a “correction.” (Today the S&P stands at 1354.)
But these broad market swings mask the rise of market volatility to today’s unprecedented levels. During the 1950s and 1960s, for example, the daily changes in the level of stock prices typically exceeded two percent only three or four times per year. Butsince last July alone, we’ve witnessed 19 such moves, 12 downward and 7 upward. This kind of volatility, to state the obvious, reflects the expectations of speculators, not the real returns of business sought by investors, which change only at a glacial pace.
Of course it’s tempting for investors to think they can take advantage of these rare but extreme fluctuations. For example, since 1950, the Standard & Poor’s 500 Stock Index has risen from a level of 17 to a recent level of 1,350. If you were able to get out of the market on the 40 days when it experienced its lowest returns during that period and get back in again the next day, your portfolio would be valued at the equivalent to 12,200 to S&P. But who among us could have the prescience to avoid those 40 bad days out of, to be precise, 14,620 days in all? Lots of luck! But for me, staying the course through thick and thin remains the winning strategy.
How Did We Get Here?
The soaring volatility in our financial markets is a product of many forces. Surprisingly enough, one is the institutionalization of the stock market. The change is dramatic: Over the past half-century, individual ownership of stocks by individual investors has dropped from 92 percent of the total to 26 percent. Institutional ownership—largely by mutual funds and corporate and government pension funds—has soared from 8 percent to 74 percent—quite literally, a revolution in stock ownership that has changed the nature and structure of our financial markets.
Part of the problem is that these giant institutions, striving to build their own profitability, turned their focus away from management and toward marketing. Let’s call that the triumph of salesmanship over stewardship. These agents—now largely controlled by giant U.S. and international financial conglomerates—have too often put their own interests ahead of the interests of those whom they are duty-bound to serve, those 100-million-plus fund shareholders and pension beneficiaries who inevitably feed at the bottom of the food chain of investing.
What’s more, I would argue that our now-dominant institutional agents have not only failed to honor the interest of their shareholders/beneficiary principals, but they have also abandoned the time-honored investment principles that focused on the wisdom of prudent long-term investment, and turned instead to an excessive focus on short-term speculation, so clearly demonstrated by the soaring portfolio turnover that I described earlier, a change that is detrimental to their own interests as well as to our financial system.
Turbulence and Financial Innovation
To be sure, financial institutions have held the majority of all U.S. equities for several decades now and their focus on short-term expectations with the attendant high turnover has been in place even longer. So what is it that accounts for the recent surge of market turbulence? To begin with, in this new environment, the raison d’être for money managers, and basis by which they are held accountable, became the maximization of the value of the investments made by their clients, measured over periods as short as years or even quarters. Even as institutional managers turned increasingly to speculation (just as Keynes had predicted), corporate executives became increasingly attuned to short-term profits and the stock-market valuations of their firms. I call this the “happy conspiracy” among institutional owners of stocks and corporate managers and directors to focus more on stock prices—speculation—than on long-term intrinsic values—investment.
Another culprit is financial innovation. While innovation is broadly regarded as an unmixed blessing in the financial sector, it is hardly uniformly so. There is a sharp dichotomy it seems to me, between the value of innovation to the financial institution itself and the value of innovation to its clients. For the providers of financial services are heavily motivated by self-interest to organize the instrumentalities of business and government—let’s call them stocks and bonds—into packages and, well, “products” that earn profits for themselves, even as they are also designed to serve the perceived needs of investors. Some of these innovative products are simple and cost-efficient; others, at the extreme, are mind-bogglingly complex and expensive.
What’s more, our institutions have a large incentive to favor the complex and the costly over the simple and the, well, cheap; quite the opposite, I would argue, of what most investors want and need. Given recent events in the financial markets in which some of our nation’s—and the world’s—mightiest financial institutions have collectively already taken some $90 billion (estimated to total an astonishing $265 billion when all’s said and done) of write-downs from their forays into relatively new, untested and complex financial instruments such as collateralized debt obligations (CDOs)—let alone the hundreds of billions of losses experienced by their clients—there can hardly be a more fitting time to consider whether innovation has, once again, gone too far.
CDOs are but one example of the exploding market for financial derivatives. As recently as 1960, for example, derivatives on the S&P 500 Index—futures and options in essence, speculation on the future price of the Index, either to take on huge risk exposure or to hedge against market declines—did not even exist. Today, an estimated $23 trillion of these futures and options are outstanding, compared to the $13 trillion actual market value of the 500 Index itself. The “expectations market,” then, is almost double the value of the “real market.” However striking that relationship, these derivatives are a mere drop in the bucket of the global total of some $500 trillion in financial derivatives of all types; as a point of reference, the gross domestic product (GDP) of the entire world is about $50 trillion, a mere one-tenth of the derivative total.
Back in 2003, a remarkable debate about derivatives occurred between two men who must rank among the most respected leaders of the entire financial community. Warren Buffett described derivatives as “financial weapons of mass destruction,” while Alan Greenspan applauded their benefit, noting that “the prudent use of derivatives help banks to reduce risk.” Now, five years later, it seems clear that Buffett got it right. While innovations such as derivatives have enriched the financial sector (and the rating agencies) with enormous fees, these over-rated, as it were, CDOs have wreaked havoc on the balance sheets of those who purchased them, including the banks and brokers themselves. They too bought them, and in the end, with many of them still on their books, were left holding the bag, hoist, as it were, by their own petard.
What is more (if we need more!), related “specialized investment vehicles (SIVs) have also created havoc. To sell these instruments, our giant banks increasingly issued “liquidity puts” to buyers, guaranteeing to repurchase them on demand at face value. Citigroup, it turns out, was not only holding $55 billion of CDOs on its books, but also some $25 billion of SIVs that have been “put” back to the bank, a fact not publicly disclosed by Citi until November 5. Astonishingly, Robert Rubin, chairman of Citi’s Executive Committee (and a man, one might say, of not inconsiderable financial acumen) has stated that until last summer he had never even heard of liquidity puts. (Not quite as embarrassing as former chairman Charles Prince’s earlier comment: “As long as the music is playing you have to keep dancing. We’re still dancing.”)
The peculiar characteristics of financial innovation are not limited to fixed-income investments underwritten by our investment banks. The mutual fund sector too has much to answer for. Innovation in the “Go-Go Era,” circa 1965-1968, saw the proliferation of scores of new “aggressive growth” funds, frankly focused on stock prices rather than business values. More recently, in the later 1990s, innovation in the mutual fund sector was designed to capitalize on the so-called “New Economy.”
In that “Information Age,” we created literally hundreds of technology funds, telecommunication funds, internet funds, and, once again, “aggressive growth” funds whose holdings were dominated by stocks in those sectors, luring nearly a half-trillion dollars from fund investors during the three-year-bubble surrounding the market’s peak in March 2000. When the great bear market came, these fund investors, were the primary victims, as the NASDAQ (“New Economy”) Index dropped nearly 80 percent, and the NYSE (“Old Economy”) Index fell by 33 percent. Was this innovation good for fund marketers? Clearly yes. Good for fund investors? Categorically no. It remains to be seen whether today’s hottest mutual fund idea, ETFs—index funds that “can be traded all day long, in real time—will prove to be a blessing to fund investors, or a bane.
The Age of Turbulence
In today’s turbulent markets, I find it ironic that former Federal Reserve Chairman Alan Greenspan chose “The Age of Turbulence” as the title for his recent book. As skilled as he may have been in directing our central bank, he did much to bring that turbulence about. His adamant refusal to have the Fed take a stand in setting stringent credit standards for bank lending and mortgage issuance has been well documented, and his determination to hold down interest rates far longer than economic conditions seemed to dictate did much to feed speculation in the bond and stock markets. It will be interesting to see how history finally treats this icon of central banking. Even as Chou En-Lai answered when asked about the implications of the French Revolution, “It is too soon to tell.” So it is with the Greenspan legacy.
Today’s turbulence reflects in important measure the failure of our commercial banks and investment banks to consider the extraordinary risks of the securities they were creating and marketing, and earning billions in fees and commissions, even as they were left with tens of billions of dollars—even hundreds of billions—on their own balance sheets.
The key question is the extent to which these problems in our financial system will infect our economic system. The long boom in the real estate market has now turned down, with home prices in retreat, even as the same thing happened in the stock market early in 2000, and stock prices remain below the levels they reached eight long years ago. As I see it, our policy makers are running scared, with the Federal Reserve making credit available to banks (a good, and necessary step) and driving short-term interest rates down (great for borrowers but terrible for lenders and savers, and probably terrible for the dollar). I’m not at all sure that this is sound policy-making, for it increases the likelihood that inflation will rear its ugly head later on. Maybe, just maybe, we should not intervene and just let the markets clear.
Our political leaders, too, seem to have pressed some sort of panic button, enough to unite a Democratic congress and a Republican administration in an election year. But I’m also concerned that the $150 billion fiscal stimulus plan—right out of Keynesianism—will not provide much in the way of stimulating the economy, even as it adds to an already staggering deficit in the Federal budget. Yes, it’s easy for our politicians to give money to “the people,” for of course it’s these self-same people who are in fact doing the giving. When they pay for the “gift,” either through higher taxes or through devalued dollars, that truism will become clear.
In short, it is by no means obvious that this combined blast from our monetary masters and our fiscal authorities will make a positive difference either to our markets or our economy. Dare I say, “It is too soon to tell.” Not only are our markets driven by the confidence of investors putting their dollars on the line, but our economy is driven by the confidence of consumers spending on their needs and wants, and corporations, spending to enhance the returns on their capital.
The inherent risk in our financial markets—enhanced in the recent present era by truncated time horizons, the dominance of speculation over investment, excessive financial innovation, easy credit, a seeming unawareness of burgeoning credit risk, and a concentration of assets in banking conglomerates—has markedly increased during the recent era. I share the concern of many economists that these problems in our financial system may well carry over to the performance of our economy, now approaching—if not already in—recession. If that is the case, we will see the leveling off of corporate earnings growth, perhaps followed by significant earnings declines. Thus, the probabilities favor continued market turbulence—and some economic turbulence as well.
So the risks are high; the uncertainties rife. Yet perhaps we’ll muddle through. After all, throughout our 230-year history, America has always done exactly that. Perhaps, once again, our society and our economy will continue to reflect the resilience that they have demonstrated in the past, often against all odds. And perhaps we’ll come to our collective senses and develop the courage to take arms against this sea of troubles that I’ve described today, and by opposing, end them. If we do, the stock market will undoubtedly respond and resume the upward course that is based on the intrinsic economic value of business growth.
Let me close on this constructive note. Of course our markets need “financial entrepreneurs,” traders, and short-term speculators, “risk-takers restlessly searching to exploit anomalies and imperfections in the market for profitable advantage.” Equally certain, our markets need “financial conservatives,” long-term investors who “hold in high esteem the traditional values of prudence, stability, safety, and soundness.”2 In my judgment, today’s turbulence is one of the prices we pay for letting that balance get out of hand.
In his brilliant 2001 memoir, On Money and Markets, the economist/investor Henry Kaufman, one of the wisest of all the wise men in Wall Street’s long history, shared my concerns, expressing his own fears about the derivatives revolution, the corporatization of Wall Street, the globalization of finance, the limits on the power of policy makers, and the transformation of our markets. In his final chapter he summarizes his concerns:
Trust is the cornerstone of most relationships in life. Financial institutions and markets must rest on a foundation of trust as well. . . . Unfettered financial entrepreneurship can become excessive and damaging as well-leading to serious abuses and the trampling of the basic laws and morals of the financial system. Such abuses weaken a nation’s financial structure and undermine public confidence in the financial community. . . . Only by improving the balance between entrepreneurial innovation and more traditional values can we improve the ratio of benefits to costs in our economic system. . . Regulators and leaders of financial institutions must be the most diligent of all.
Together, we participants in our financial markets must work together to restore that balance, and return financial conservatism to its rightful pre-eminence. For as Lord Keynes wrote all those years ago, “When investment becomes a mere bubble on a whirlpool of speculation, the job of capitalism will be ill-done.”
That is the one thing that none of us can afford to allow.
1 Since 1980 the data include turnover on NASDAQ, which came into its own during that era.
2 The quotations are from Dr. Kaufman’s book, page 304.