Neither in this article nor the interview http://www.cnbc.com/2017/05/08/buffett-called-me-a-hero-but-im-just-a-guy-who-gave-a-damn-about-investors-says-jack-bogle.html do I see where the explanation is provided.
The article would make sense to me if the title were changed to "John Bogle explains why index investors shouldn't fear the growth of indexing," and the sentence " Namely, what will those investors do when the market inevitably turns sour?" were deleted.

FYI: Very interesting visualization:
Regards,
Ted
http://ritholtz.com/2017/05/visualizing-usa-debt/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+TheBigPicture+(The+Big+Picture)

FYI: Investors are clearly shifting away from actively managed funds to those based on index strategies. Only time will tell, but this has the look of a durable, secular change in investment management. But much of the perceived threat to market stability of indexing is overblown. Overall, the stock market is still dominated by active management. And while the number of index products has clearly exploded, 96% of these are of insignificant size.
Regards,
Ted
http://fat-pitch.blogspot.com/2017/05/the-worry-over-indexing-is-overblown.html

FYI: Fresh off a weekend visit to the "capitalist Woodstock," the annual shareholders meeting for Warren Buffett’s Berkshire Hathaway BRK.A, +0.28% BRK.B, +0.24% , Vanguard Founder John Bogle addressed an interesting question that must vex any retirement investor who relies on index funds.
Bogle was asked the following Monday to explain if the move by investors toward index-style exchange-traded funds (ETFs) was creating a new kind of risk.
Regards,
Ted
http://www.marketwatch.com/story/buffetts-hero-john-bogle-explains-why-index-investors-need-not-fear-a-stock-downturn-2017-05-15/print

Re: "There is no genius to Bloomberg statement. What they are saying has always been the case."
Those of us who lived through the S&P 500 Index euphoria of the later 90s would tend to agree.
What may be different, however, is the magnitude: "Vanguard saw inflows of $1.8 billion on the active side and was the top fund family on the passive side, with inflows of $36.2 billion."
I've seen where over $1 Bil daily is flowing to Vanguard - most going into passive funds.
And about 20 times greater (at Vanguard) than in 2000. The specific quotation/source eludes me.
https://www.thestreet.com/story/14093218/1/morningstar-reports-us-mutual-fund-and-etf-asset-flows-for-march-2017.html

We don't need bloomberg to tell us that right? Index investing is momentum investing. By definition you are buying more of the stocks that are going up and even in down market you are buying more of the stocks that are going down less. Value Indexing is also buying more of stocks going up which should make them less valuable.
Basically what we are saying is that Active managers suck at momentum investing. Let the market tell you which stocks to buy on any given day through the index, which will automatically switch you into the higher momentum stocks at the top. As long as you keep on cost averaging in, you don't have to sell the stocks lacking momentum, you simply buy more of stocks gaining momentum. In theory, this will continue till the end of time.
If we had a $300 Billion Active fund, it would influence the markets the same way an index fund does as long as people kept sending money to it. Until they stop. There is no genius to Bloomberg statement. What they are saying has always been the case. Coming out of bad bear market, people are seeing the long term numbers of their funds now. A "perfect storm" 10 year performance number tells you, your active fund manager sucks, and you switch to index fund. That's bound to cause a surge. Not sure it can sustain all by itself.

Someone smart once said that the goal of investing is to pay as much taxes as possible (the reason will come to you).

So you should live on a coast where you have the opportunity to pay more taxes on your investment earnings? :-)
Okay, I can see some sense in that. More high culture options (not forgetting the Chicago Symphony/Lyric Opera/Art Institute - another high tax state), better weather (at least the west coast and Hawaii; that state's got coasts too), and so on.
https://www.usatoday.com/story/money/nation-now/2017/04/05/these-states-where-you-pay-most-taxes/100064034/
At the risk of repeating myself (from 2013), I think Jim Lebenthal said it better (or smarter): "It's not how much you earn that counts, it's how much you keep." Sometimes earning less leaves you with more to keep. Especially if you're investing with a moderately short term target in mind.

Thanks for the thoughts there, we both max out our 401Ks and do 1 Roth conversion every year (we don't each do 1 so we can keep a bit more liquid for an eventual house - which is mostly motivated by the tax code, we live in a high COL area so we're even thinking of buying a rental property). The aversion to taxes is a big reason I'd think of stashing some cash in MANKX, though their short treasury futures position would be a drag on performance in an equity pullback. Perhaps a more core/laddered NY muni fund would be a better fit.
Speaking of pullbacks, a big reason for the large cash stake is the potential for a pullback. If so, and assuming it was fairly evenly distributed across risk assets, I'd probably add mostly via buying some low fee ETFs (either SPY, or a mix of IUSV and IUSG and their international equivalents) or perhaps the Blackrock quant funds, though I'm waiting to see some more information about them.
Appreciate all the insights, I probably don't need as much in fixed income, I confess part of it is just that there seems to be a lot of return potential there and a lot of smart managers in the space, but just investing with a smart manager isn't a good reason to be overweight credit over equities or rates.

Hi Josh!
You're married.....wife's money long time invested....good stuff. As far as 401 money, why wait? You can't get it for a long time. Tell me what beats the S&P over time. What fund that's as cheap as an index. As far as investing, now, I'm selling mostly....but I am waiting for the Donnie movies to come out: Donnie and The Russians, Donnie Does Korea, Doing Tax Cuts and HealthCare the Donnie Way. I say all that to say this: Are you ready for a pullback? Have you a plan where to add? If you do buy a house, then cash in the taxable port. I have only 1 fund in a taxable account. Save most of what you can in a 401. You can always borrow from it. There's no sin in that.
God bless
the Pudd

FYI: Markets always seem easy when looking through the rearview mirror because knowing what already happened makes us all feel that everything in the past was blatantly obvious. It makes us feel that we would perfectly navigate those markets if only we had the chance to invest in the same scenario again.
Regards,
Ted
http://awealthofcommonsense.com/2017/05/how-many-will-stay-the-course-during-the-next-bear-market/

67 as of May 08, so maybe a recent birthday, and 411.com says 76
interesting piece, talk about outperformance:
http://archive.fortune.com/2008/05/23/magazines/fortune/birger_americas_hottest_investor.fortune/index.htm

I just initiated PVSAX position in one brokerage, and then sold all holdings in other brokerage. Lot of profit I expect to offset with tax loss in HSGFX in 2017.
Putnam seems to have some good funds, but then some rank bad ones. This is useful news for me. I will research their alternative funds.

Interesting idea, albeit with a biased presentation.
The article says "Sure, a couple of funds will ...rise above the benchmark, but for most the result will be far less than the average. "
The average of the losers will be less than market performance (by definition of "loser"), but not that far less. That's because there are more of them than there are winners.
Think about dividing funds into outperforming and underperforming buckets. Assuming the funds are of equal dollar size, the larger bucket's average must be closer to market performance than the small bucket's. That's just simple arithmetic.
For example, suppose there are twelve funds covering the market. Suppose two outperform by $5 (total excess return of $10). Then the other ten funds will underperform (on average) by just $1.
We can invert the 5 poker chip example in the article. Instead of having funds pick two chips out of a market of five, as the example in the article does, suppose all funds pick two stocks to exclude. Just as 6 out of 10 funds miss the big winner if they pick only two chips, 6 out of 10 funds will miss excluding the big winner if they exclude two chips. So 6 out of 10 funds will be winners (but not big winners).
All just a little fun with numbers. It gets back to Sharpe's observation that the average dollar must get the average return before subtracting fees.

FYI: An overlooked statistical concept shows why it’s so hard to beat a benchmark.
Regards,
Ted
https://www.bloomberg.com/news/articles/2017-04-09/lopsided-stocks-and-the-math-explaining-active-manager-futility

FYI: Putnam Investments plans to introduce three new alternative types of mutual funds that will be managed by PanAgora Asset Management, a Boston firm that typically manages money for institutions and is majority-owned by Putnam.
Regards,
Ted
https://www.bostonglobe.com/business/2017/05/24/putnam-unveils-three-new-alternative-mutual-funds/LiuZDWWbKt9bF9HCfWk54L/story.html

From the article:

To sell we'd need a Fed that's more hawkish than expected mixed with economic data that's weaker than expected. That combination could give us a domestic stock sell off this summer.

Economic data is coming through weaker than expected according to Nancy Lazar from a recent Wealth Track interview:
top-ranked-economist-nancy-lazar-discusses-the-prospects-for-the-u-s-economy

FWIW, the number three holding according to Bloomberg is Sberbank.
The fund began just three years ago, Jan 1, 2014. The inception date reported by Bloomberg appears to be the "strategy" inception date of Jan 1, 1990 (also reported on the fact sheets).
https://www.orbisaccess.co.uk/our-funds/global-equity-fund/
I've been reading through the prospectus, and while the 50,000 foot level description by Bloomberg is okay, the details seem significantly different from what's in the article. For example, the performance fee (or refund) is assessed daily, not semimonthly as Bloomberg writes. The amount is 50% of the excess (shortfall), not 33%. And so on.
I suspect that the fund would have problems registering in the US because the performance fee structure is not perfectly symmetric. Given that the fund's base fee is zero, I think it would be required to return fees in case of underperformance. The fund does not return performance fees if the reserve set aside is depleted, i.e. the management company does not make up this shortfall. Unlike Bridgeway, which actually paid into one of its funds for underpeformance at one point.

For disclosure purposes... I do own OAKIX, WAIGX and TAREX. Some of my domestic equity mf's have anywhere from 0-20% international exposure. My portfolio currently sits @20% international equity... enough??? Do I need 8-10 mf's dedicated to international/Asia??? Just saying...

I will let someone else attempt to give you a definite answer. I will give you mine.
IMHO, you have demonstrated you have a sound head already. You have already concluded you do not, or you wouldn't have asked the question. Because it is quite clear it does not make sense to you. Or sense FOR you. Don't let anyone convince you otherwise. If it indeed has to be so then YOU in time will figure it out, and that is good enough. I have learnt from my mistakes. I never learnt from OTHER people's mistakes.
If you listen to "expert" telling you US is dead, International reigns supreme, you could go 100% international. Whatever you decide one thing to remember is that you don't make a living the same way as this "expert" does. HE (and I don't say SHE because we know gender diversity does not exist in the field of "expertise" we are talking about) has already made his money shoving his "expertise" down your throat. Those are HIS earnings. What you do makes no difference to HIM. It will make a difference to YOU.
YOU decide. And once again, when I say "expert" I meant the financial pron stars. MFO "experts" are not experts, they are your well wishers and your "teachers". That's how I see it.
Happy Anniversary to ME. No, REALLY. Now let me sell some of my international holdings and show my wife a good time.

FYI: The New York Yankees. The New England Patriots. The UCLA Bruins. The Vanguard Group?
Regards,
Ted
https://www.bloomberg.com/gadfly/articles/2017-05-26/vanguard-is-king-because-mutual-funds-aren-t-jeans