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Wall Street's incredible run of volatility today's prime example is showing no signs of letting up.
But here to help write our course and is to directional -- market is Vanguard Group founder Jack Bogle and a box.
Bid exclusive Jack it's always great to talk to -- first I have to ask you about a comment that you made you say that for the average investor right now.
That this market is basically you rigged why used to strong work.
Well I use that strong word because I was talking about the dealers -- speculation.
And what's going on our market day after day minute after minute today there is a terrific example is you see these.
In -- in exportable.
Ups and downs based only on people's opinion people's expectations.
And they can change as much as you want and that's why the game of prices is -- But the -- values.
Can not be rigged and that has to say in the long run.
The returns on stocks are created.
By how corporate America does what the dividend yield is right now it's not great but it's okay to about two and a half percent to a quarter percent rather.
And about half a long term norm.
And earnings growth is probably gonna run about in the next decade at least around five or 6%.
You're looking for an investor return on stocks -- a path that you well.
That averages out about.
That's a 7% a year for stocks and what happens -- the market.
Well -- speculation.
Takes that number and that -- line in the chart way above and and way below and people are better off not the pay attention.
So it's it's the game of stock market investment vs the the business of investing in your your focusing on the business -- how do you.
I wanna get into the business of investing I don't wanna get into stark market can't.
Game I can't actually because they're gonna hold stocks for a long time because of what I do but how do you get into the business of investing as opposed to the stock market -- As I said in my book called little book of common sense investing couple of years ago the stock market is a giant distraction.
To the business of -- Think about that for -- and of course it is for the way you get in the business of investing is a at owning the entire stock market through all market index fund or S&P 500 index fund.
There's no trading and therefore no trading -- the many the carry out a and I can the course of these funds is because we don't spend a lot of speculators to change those stocks are and don't pay money managers.
You're gonna buy one of those index funds a good one.
Aboriginal -- it is and pay may be less than a tenth of 1%.
Per year for the cost and then you'll capture in the long run the investor returns -- by corporate America.
-- in the long run that's what returns are you know law that long term.
A return on stocks that we hear about 9% -- for her percent dividend yield and four and a half percent.
Earnings growth and zero -- speculation.
Let me ask you something Jack -- -- are -- -- talents are I do wanna ask -- this up because our viewers anytime that your.
On -- that so many questions and may need advice right now it's a very frightening time for many of our viewers.
It seems that a lot of sectors.
Right now are are on sale that are undervalued is anything on the market you would say right now it's still too expensive it could be a stock it could be a commodity what would you say.
I just don't even fried at -- that because in the stock market consider this your pitting one investor and against another and supposing you thanks for example technology stocks are undervalued.
So you -- We'll somebody else obviously thinks they're overvalued because they're selling you selling -- So -- market is basically -- closed circuit machine and your pitting your brain or your wisdom.
-- your speculative urge -- your behavior.
Against that everybody else in the market.
And ultimately because of the cost the playing that game it's -- losers game.
But the problem -- has is -- Diane swap was just talking Marty Feldstein was saying yesterday we made BN for the long -- for a long term recession we're not just target about.
1618 months we're talking about 234.
Years if that happens.
Is it possible -- get negative returns even if you're focused on the business of investing.
Well if you're the only person in the market.
Who knows that we're facing may be a difficult period.
I would say get out of the market now.
But the market takes that into account a great arbitrage -- mechanism.
Now arbitrage and the president against the future -- and I think Marty by the way.
At doctor -- I guess like -- is that is on the right track and it comes from the fact.
That we we took maybe five trillion dollars we consumers.
Act out of our assets.
And -- -- put them in the liquid form and spent that consumer spending with inflated by about five trillion dollars in the first say seven years.
Of the of the this decade.
And that in more consumer debt.
More credit card debt and more second mortgages.
Which are now call home equity -- -- like the clean up our terminology.
So the consumers have to re -- To the -- -- more or less five trillion dollars so we're plus five trillion spending on the upside.
Now we're going to be minus five trillion -- where we otherwise would be and that is going to take time.
And nobody likes to take time and it's instantaneous market it's gonna take patients.
Whether doctor Feldstein is a little too bearish I'm going to guess He is but I'd say.
Three years before it really get the American economy -- -- -- -- do again.
Jack Bogle the man who invented index funds for vanguard thank you very much -- wonderful to see -- appreciate have a good weekend.
Thank you say do you -- are.
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