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What John Bogle Has to Say

October 8th, 2008 at 06:16 am

John Bogle (founder and former CEO of Vanguard) appeared on CNBC's Squawk Box this morning. The moderator described him as a "patient, long-term investor" which makes him my kind of guy and I'll admit to being a bit of a "Boglehead" (fan). Based on my notes (of which I do not guarantee the accuracy), this is a summary of what he had to say.

On the Economy: He said that he really does not know what will happen with the economy in general. (He mentioned that it is crucial the "toxic" assets get written off of banks books but said something like he does not know the best way to make that happen.)

On the Stock Market: He said that this is the most speculative market in the history of finance. He said that the speculators are betting that other speculators will bet the market is going to get worse, and that is driving the market down. He said that if the speculators want out of the market: "Let 'em out." Smile He said that the fundamentals of the market, what he referred to as "boring stuff" that the speculators don't care about, dividend yields & book value, are sound, and they are what will eventually turn the market around. And when will that happen? Again, Bogle said he does not know for sure (and no one does), but that he thinks it is probable that we are about 1/2-way through the current market decline.

On Individual Investors Who Are 5 or so Years Away From Retirement / Asset Allocation: He says that if there are individual investors who cannot afford to lose even one penny of their investments, then yes, they should get out of the market ... But he also mentioned that they never should have been in that position to begin with. He said that people should have had a percentage of their portfolio in bonds that is the rougly same as their age. (In other words, a 75-year-old would be holding about 75% of their portfolio bonds). He said that people who had set up their portfolios prior to this market downturn in a way that is consistent with what he recommends "are hardly being impacted" (they have lost a few percetage points but it is tolerable for them).

3 Responses to “What John Bogle Has to Say”

  1. Broken Arrow Says:

    You know, I've always loved John Bogle. Even if I am not currently following his advice to the letter.... However, I've always recommended his advice to others whenever I can.

    As for me, some day, I'll likely follow his footsteps as well. For now, I'm still kind of young and kind of dumb, so I have decided to drive in the faster lanes. For now.

  2. merch Says:

    I always find John Bogle to be a common sense honest type of person. Every answer you illustrated above is correct.

    Personally I believe we are close to the bottom. Of course the VIX is still very high which to me means we haven't hit the bottom.

    A word you will start hearing more and more is capitulation. It seems like more and more people are throwing in the towel even disciplined investors and professional investors. Of course, Warrne Buffet seems to be going on a buying spree - GE, GS, Wellpoint, Ingersoll-Rand, and some other energy companies.

    His advice - "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

    But I bow to both men's wisdom.

  3. Broken Arrow Says:

    Warren Buffett is getting sweet deal for some of those buys. GE and GS both has made the news about it.

    Also, Warren Buffett has commented that, "99.9% of people should probably just invest in index funds."

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