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All right welcome to foxbusiness.com live everybody on Connell -- along with Tracy Byrnes -- today he's back -- get -- -- I -- yeah.
While -- so we have a terrific work.
That's great line I -- I think I start every show that way it's a wonder it's going to be like that kid who cried wolf there and we've but Jack bolts coming up later which can be a lot of fun right build a lot of time to talk to him.
And get his thoughts on the markets in the future and everything and take our viewer questions Jack -- and vanguard guys.
Get ready for that little bit later on.
In the and show some market selling up pretty aggressively -- 160 points today and retail sales number was pretty pretty rough.
It was disappointing right came in that little -- let me -- Take down -- -- down and AM that.
But I -- platinum was down and -- we're gonna talk to Diane black about this in -- -- but I think a lot of that would the disappointment was you know we see disposable incomes actually increasing yup.
And then you know and shopping.
-- if they had -- -- -- yeah it seems like people are.
Saving a little bit as opposed to spending which you know long term said that's all right we -- disabled more mature terms rough on the retail guys and talking -- -- -- was on our show.
This morning -- his whole theory is that -- -- in the midst this hundreds if not 100000 day retail recession and -- -- 500 right now.
I looked exactly 500 but he he figures were about have we been talking about the thousands recession yet he's been that's been -- thinks he still says that's what that's what it is we're.
500 days in another 500 -- so don't get to -- yourself what the book on reaching out -- sense to me that -- Boston -- -- for halfway point.
That's up was on fire the buckle once.
And what do you get when they sell home -- there.
If the idea -- team up with flew in retail right there's a lot of they're not around here that much are -- or I've never -- -- -- I was -- -- -- -- -- -- without mentioning Michael while he is likely to.
Look at the rejected the start the show today on the AIG hearings which is another big story today Ed Liddy testified on.
On Capitol Hill and a lot of that hey we're talking bonuses again wouldn't have the Washington Post -- this morning but rich yet taken away.
Well you know I think the headline here is that there is no guarantee that taxpayers -- going to get any money back from -- -- -- -- -- -- government -- -- -- 180.
Billion dollars available to invest in AIG federal taxpayers own about 79 point 997%.
Of the company.
And Ed Liddy the CEO -- -- he's essentially saying that he thinks.
It's gonna take about three to five years -- AIG to repay the government but of course that depends.
How the worldwide economy guys and he's saying that you can't rule out eighty AIG get any support taxpayer funds.
He can't rule out that in the AIG won't be able to repay that.
Well did it had to lose a lot of doors open right -- that's that that's an ultimate fair and balanced report right there as we have no idea where we stand -- at the bottom line.
You know actually you look at that you -- those words he doesn't have any idea saying greeted by -- years.
It could take -- it could take longer or may not happen at all and we could need more money that's pretty much the range of possibilities outside of -- will give you the money back tomorrow.
I think that's translation it is.
We're gonna need the money it's probably gonna couldn't we're probably gonna need it sooner rather than later even though we have no idea what's happening but.
They're gonna needed to pay the bills at some point.
The right and I think we need to look at -- -- he he makes it a point to stress.
Worldwide economy AIG is a company that is located so many companies countries its business operations are located around the world.
Even if we do you have a recovery here in the United States that doesn't guarantee that is 35 year window that he's giving us is gonna be accurate.
And it really all depends on what so many places around the world are doing in their economies whether we're going to get paid back in that timeframe or at all.
-- clarify for us also rich while we have you on the -- Washington Post story this morning about the bonuses what was known when it was known and whether Tim Geithner knew any thing before we thought he did.
Right this is something actually that we had already reported many of the documents that we've gotten pertaining to this.
Came from stuff that we had secured and lawsuits others came right and other documents that we had seen the Federal Reserve essentially was working on this program.
What that what the Washington Post article the highlights is that they've got sources saying.
That's the Federal Reserve Bank of New York Federal Reserve in New York had really no idea how to run an insurance company had very little experience doing so.
And so it seemed as though they were extremely distracted trying to figure out how to actually save the company that these.
-- bonus details that were coming out at that time.
Almost seemed to take -- back burner a wave back burner I don't think there's anything in those documents so far that we've seen -- or that the post to see that directly relates Treasury Secretary Tim Geithner.
To knowing about those bonuses back last fall but -- you -- You know the New York fed was pretty much heading up this AIG bail out and right.
Had a New York fed at that time was can Geithner and I think -- good point operates is that in -- -- guys that -- DC did a lot of this reporting already thanks to the the lawsuits have what have you and with that in mind as you look through those emails who was involved -- was it mostly lawyers speaking to each other about what might happen.
What they should be worried about how high -- level was that where these discussions out about the bonuses.
-- that they went fairly high into the into the in the reserve bank in New York in and I think it.
You know you really.
Can't necessarily say that that you can draw that exact wanted a very very top of the bank.
But it certainly was an issue among a number of the staffers who were playing a very big role in this.
And the question remains how high did that actually get we're not quite sure yeah.
Com but you know that they looked that they saw that the financial products and it was going to be getting a lot of this money that the bonuses were going to become an issue.
And then later on they made the determination that legally they were bound to pay these contracts and all of a sudden we got this tidal wave that hit congress -- hit the newspapers that.
Basically that the division that was responsible for bringing the company down.
I was going to be get be getting hundreds of millions of dollars of the bonus.
They can never got to wrap with you but quickly they're trying to sell pieces that -- meaning they've been somewhat successful overseas and no.
Here in the states they can't -- -- You know -- -- guns anybody but overseas they're doing okay breaking off these pieces little Butler and you know they're proposing to do more of -- Yet what they're looking at here specifically is proves he's needs to -- that 20% of their.
Property casualty business so they're asking the -- -- invested its foreign life insurance units as far as the financial products unit is concerned.
The risk positions went from 44000.
And the actual exposure went from two point seven million dollars.
To about a trillion and a half today and let's be real money you better than ever and yeah -- right.
Big numbers are -- -- -- -- thanks I had cats at the top of the show retention from DC on the AIG stories so.
Look at the Diane -- -- -- up from invesco who's going to be with us for the next few minutes talking at the market's great to see you get McCain coming in here what.
You know it we -- and I talked about the retail.
Number was kind of rough this morning right if -- was.
You know it's going to think if we really want to be good -- -- -- good market participants this recession is different from other recessions because.
The heart of the problem is not with companies it's not even with the government -- that household level.
And households -- borrowed more money than they could -- pay back so we see numbers like retail.
-- retail sales what's going on hum are people really know spending the money that they need to spend.
To start the growth all over again that's why those numbers become so important right now.
That's going to -- and we were just talking before the society that diet and I have known each other -- when we're talking for years -- back when.
The holders came out and the holders back then with the announce the best way to invest in -- back in 1990 and so -- -- to your point that.
The numbers where the problem back then because we were talking about companies that didn't have numbers they weren't making money right there they were just shoot in darts at wolf opened their tennis I didn't want -- And that's been a good company looked for company that was you know less than -- year -- had negative earnings that was classified Internet and you made money.
And you did right -- and so it's very different now because.
We have companies that are doing OK I mean we still have solid.
Numbers out there from some of my vote.
This is kind of -- thing because.
What's happening right now if we only talk about the quality companies the quality of the earnings the stability of the company's balance sheets but with really thriving.
-- the economy is going to be that top line growth that's sales numbers.
So the bottom line is I know.
We hate talking about unemployment people fail with the lagging indicator I don't want to talk about all the time but the -- says.
Not surprisingly unemployed people don't spend money right.
And people are really scared for their a couple of things that are really key number one because.
The job insecurity is creating the scenario where.
Everybody was called everybody keep three months of saving for the bank and -- -- Iraq well two things happened one we've now set up it's going to take six months.
In order to find a job and number two -- three month.
And the rest of your savings -- I don't know cut in half right or 40% that whatever the number is.
I think a lot of people are now in this in this kind of fear scenario and we -- the savings rate jump up to 4%.
And it's certainly heading higher and I think a lot of that.
Have to do with the level of insecurity that we see -- all pervasive at the market.
It -- long run you could also be so good people saving more money.
Well that's true I think -- likely -- happen -- the food people feel more stable better job at the start that I'm gonna go right out I don't know that yet kind of and reading.
He started I think you start to feel it now this I yeah.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Still don't see people someday go to the -- well I don't I'm I don't think I'd say hey you know if I didn't I didn't let -- get your drive behind McCain and not buying and even Wal-Mart they're not they're not spending -- but I think what they're doing if they're looking at -- -- speech and ideas and -- -- -- go on -- always -- doesn't doesn't come back and -- with -- is a good -- a lot of bargaining that's happening right and that -- yeah right prices.
Listed on the product they're saying give me the recession discount.
I think your point of -- about the numbers is a great one in that we need to see the top line growth because we're not.
They all their earnings numbers we're seeing we're seeing good.
Bottom line numbers I -- -- Because here's what's happening with with -- that was so important is certainly we are service oriented industry right the biggest expense for companies have aren't well.
So listen we think all these huge layoffs -- lay someone off as soon that.
You know packet goes out and failure three weeks severance pay that immediately the -- are in fact I would think earnings beat.
But that top line sales numbers -- on so many companies because these same unemployed people immediately become consumers and that's what's -- -- now.
That's really that that's what we're up against right now so when's return when he certainly is seeing I actually think it already is starting with time and I think -- in the way that we're saying this.
I -- if you think about the unemployed population.
Character I'd like nothing bad -- what they are educated.
They have experience and this is a white collar recession that these are people that are used to coming from a position of influence so what they're doing is exciting new company.
So what I think what we're entering into right now is an air of entrepreneurship.
And that's what we're gonna think these small what we have a these young kids right -- gen Y folks coming out of college -- -- -- -- -- -- -- I don't data going to be a whole bunch of new companies that are signing up if you look at the data.
Of companies that are just being formed state by -- it's growing the fastest in the in the -- but have the high unemployment.
So I think the barriers of entry in the technology space -- just start a company.
If -- lower and that's creating a scenario where more and more people are working but the hunch is that we have these.
Younger people working with these kind of baby -- that have been laid off from playing your career.
And if we could start to get those two groups together these young kids that have been great technology -- -- -- folks that have the real business acumen that's when we're gonna be a big time.
Well and technology point we had someone -- happy hour last night who does Angel Investing my Angel funds.
And his point -- you can -- help me with your idea -- I think he's decent typical again for these guys right he couldn't get these seas adventure capitalist save your life right and -- you can and you would hope that this would spark some much.
That doesn't mean there's less of it -- more of it -- Mean there's a lot less of -- than if you get in front of the -- -- here.
I don't know if it means that could be single seat when he deals at but they're still looking for ten.
Right so I think the other thing very important is.
When you think about -- -- are starting a new company it's not necessarily find one night via an anchor yourself to that idea right.
If it's more a lot like dating and marriage -- I wanna go out over Melbourne come -- I think what we -- You have -- -- about financing a -- business like I mean usually have to borrow money to do it well that's with a BCs are stepping up the hill right and that's the big issue is two things have happened one we have.
John finally it's less expensive to ground via website and starting -- kind of -- some of your model until you have the DC that are finally becoming eager.
To find new American -- me.
Someone actually made it -- about the white collar recession and I question not as well because -- what about all the people.
All the auto companies that are dropped out people pets and any -- we have construction layoffs for months and months now -- got people.
As -- -- had a -- pictures it's very true that if everybody that's been impacted I don't think there's a single occupation hasn't and in fact that.
But you have to look at where the highest unemployment is and we're excited and that's all in the middle management -- so even if we look at companies like GM warm.
Construction companies people are saying -- one or two guys to run the business not.
Fifty right and then I need you know.
Instead of a hundred guys actually implementing the business -- -- 75 and -- everyone in the middle of the things we've found.
That's not really the line work area.
There have been impacted as dramatically as that middle management thing -- to get some investing ideas in this and in this particular environment she -- difficult and everything else so what would we get you know I think that took place at that make the most sense right now.
Are going to be in the technology and -- -- large cap.
I think we're gonna feel a lot of and the -- activity happening there and -- or in -- -- and impact.
I ride the big run and a lot of those socks already about a couple I had read that you're still like a lot of -- too because these fellas have a lot of cash.
And I think you know right now is a great I'm glad acquire some of the companies that may or may not make it.
-- companies are buying like NE -- like that QQQ how many keys and you have here if you can't.
Just keep growing and growing -- and do the return.
-- yeah I think.
You know buying it and then the whole index right you find that in that and I think that's a lot -- -- impact to have Jack Bogle coming on.
And -- talk a lot about and that's why that's so important I.
Set -- -- from the rest -- think pac.
Think that and really good chance here and then pump signs -- the US small cap space.
It's kind of interesting at the end of June when we have with Russell reconstitution.
All of -- little companies getting knocked out all of the big companies that were in the Russell 1000 that it had a horrible and you act are getting a push down from the Russell 2000.
Some of them are just going through bad times and actually good quality companies we're gonna nominate -- back.
Interesting contrast to some -- the other day about that in his point was the small companies.
-- much more flexible and they have the ability to adjust to this changing economy right now -- a lot harder for these larger companies.
Sure Daniel came in -- great point when -- go into every fashion.
The one thing we know what we don't know we don't know ninety million things right the one thing that we do know.
Is that consumers' are gonna change their preference for things at the other end of the recession.
The best case is you know looking at the depression if you've ever met anyone with her depression you know they're still wearing their teacher from this -- -- -- Plus six Clinton Campaign I mean that's -- the way to look at hands so what everyone participate models of how our consumer is going to be thinking and consuming at the other side of the recession.
And your -- on small companies can perhaps that a lot faster than you think plumber what -- About going outside the United States what about emerging markets for example one of our viewers DJ jazzy jazz wants to know how -- and -- very quietly and TJ hasn't had a -- the emerging market ETF has been now outperforming the S&P 500 for several months must know that it's likely.
We -- activity at -- is assembled right -- and that it I do like the markets still are now so I think emerging markets have a tremendous amount of opportunity.
But one -- fact that you really have to be careful about is you have to be willing to take the volatility associated with fat.
I've -- you loved him.
They're decent time I'm not putting the time I think it's the ability to take on risk those are much more.
Risky that investment in the developed -- think this plan -- really confident that.
But you still -- -- there.
So sure I don't think that places like Brazil China electric spent in you're gonna stop growing.
But I do think we're gonna have very erratic period finally gonna have big growth and then tremendous slowdown big growth from end of and the price that.
-- I think you're gonna have a lot more volatility there -- in the development.
What about the -- real estate market commercial real estate I mean.
I and that but that's how we want anybody anywhere that this commercial real thing is fairly priced.
And now we all think Anna and nice if the market the prices persist at this level -- that's gonna continue to weigh on.
On this overall market I I actually think you're right -- one of them and one of the few ways that we can get that that if we do in fact have all of these new companies that will eventually need -- -- and that's one of the one of the few places that we're gonna Austria and you know -- we need some -- -- about all the people that left financial services or any industry.
That are now signing on their own thing went into three -- -- -- That's really one of the few places where Vincent -- That's interesting what's your view on the on the market rally overall because it's been a -- we've been -- week to look at.
Adjusting to things are down 150 today on the Dow and you know we had -- huge run into there and one of our viewers pointed out just a moment ago -- the Great Depression had.
Twenty bull rally it's if we get of these -- honestly -- huge bull market how bear market rallies in the Great Depression.
And a lot who are comparing what we've seen over the last few months to that is that how you view it -- that welcome to the retesting the lows and everything -- -- -- Lamar optimists thought this.
Kind of interests and let's just this is this is the way and the development of my thought process and it's really important here.
I could not -- I was so sad I thought oh my -- I have to go out and buy it Kate.
To celebrate the one year birthday of the credit crisis but it pretty market seems to think -- took.
Right and it's true I.
I couldn't I couldn't figure out one of the fellows was -- into the world with coming to this dramatic end tomorrow where does just fine.
And after going through the -- all the time I realized well neither of them were right with somewhere in the middle.
And I put it kind of a bolt he's saying oh -- -- -- is likely to fall 20% and I wouldn't investment what was found 25%.
And the name it people like down nine -- and everywhere that I've gotten credible email from people is that how un American help if you think that that you know.
And then all of a sudden hearing it innocently fitting in in Tokyo and I get a -- -- -- for the US government is gonna save everything and the stock market rallied huge.
So I thought I never thought about government intervention -- completely wrong and then at the government intervention we got to see what this package was -- how.
Near perfect voted down remember all these changes finally they they get an end so.
I -- the government would only step in to this effect if it's worse than even the bond people.
So maybe the bond people are being so conservative right and fixed income folks even they were being conservative and in fact.
As the data revealed itself we thought they were right -- I've -- the market -- -- -- fall apart from now.
I feel like I never go to sleep worrying -- -- the market's gonna fall 20%.
I don't think I think -- you know what we can have a plus or minus 2% say today tomorrow the next day we're probably in the -- It was kind of interesting people who are weighed older than me and emphasize that -- next decade older than me.
They don't ask if the market gonna go up or down they asked if the market gonna go up down.
We'll think the same right right mean we have the full period when the market that nothing.
And we just went inside this lane and I think that's probably where we're going to be for the next year or so.
And then once the economy -- really -- that -- people are willing and able to spend.
Back to read and seen this dramatic growth again we've been hearing sideways -- you think the market will move sideways for at least a year.
Right well I think between now and the end of the year Republicans have positive returns that you know at some people up close to a thousand where -- -- today.
But I think you would absolutely be -- not -- 20% year than everyone you know -- hoping for.
We'll see how play that -- always good to see you and thanks very much for coming.
The continent Bangkok is an investment strategist at invesco all right.
Two Jack Bogle and a few minutes -- from vanguard is gonna come on that'll be another interest in view on the market overall but Amy Hoak for MarketWatch joins us first.
Q talk a little bit about.
About home prices that have been declining and you know what people are doing in this environment she's written about it.
Over the last few weeks and the idea guess -- is that.
Fewer if people are gonna buy a new house I don't know did they go out and and improve the one that they that they already -- what's happening.
Yes but a little bit they're not doing -- -- crazy you know kitchen remodel.
Yet not doing you know about the whole thing the whole shebang.
-- kitchen remodel they're doing little parts of it they're doing.
-- be facing of their pitching cabinets are replacing account our top.
Little things that can really make a big difference in Atlantic monthly -- how comfortable it is.
Things like that they're also looking at home energy efficiency improvements.
Some of those can be it can qualify for a federal tax credit also.
But -- to inflate their home batter maybe replace some windows.
And even little splurge is like hot tubs -- -- TV they can kind of make it more comfortable for them to living people are realizing.
They're going to be -- their -- for a while a lot of people don't -- -- Market any -- using to pay for these upgrades you know it are we dipping into savings act or are we getting home equity loans.
I don't have firm data and that I know it's very hard to get home equity -- right now probably -- dipping into savings.
The good thing is what some of his remodeling projects out prices have come down well you know I think that Madonna a lot -- There's a lot of deals in the marketplace right now no matter what you're looking high.
But material prices have come down somewhat remodeling project and the labor costs have come down.
Fewer people are in the business right now -- the ones who are looking for work they're competing with other people in the industry you can get some good deals right now on remodeling.
To -- questions coming in or comments actually more which is actually more important for our viewers right now as we're speaking because.
You -- Jeff in New York talking about the building supply business that he's insisting you're very very quiet this and in Nebraska isn't construction saying they're just sitting here.
Hoping that the that the phone will ring.
Yeah its so it sounds like -- -- -- that those would be the bigger projects a sense again got by -- let me be the Japanese on the -- that you know.
And remodeling the house which I guess makes sense it seems that even even throwing up a little bit further people trying to to add to it thinking about they already on a house but.
But you know reluctant to do it right now -- -- -- that pretty much what you're hearing also.
Any kind of jiving with what our viewers are saying.
I think so I think people are putting on hold what they can I think that there's definitely this attitude.
We're gonna save money or -- and it's splurge a lot.
But they are doing some little things I elect is that -- a lot of contractors they're waiting for the phone ring.
Same current bottlers.
-- people who.
Maybe during the boom times -- was so popular it was -- was so easy to get.
People are trying to do remodeling projects they thought well we'll we'll do it and we'll figure it out later because credit was so easy -- that's not the case now so if you are in a position where you can make remodeling project happen.
You know you can get your phone answered finally.
And get somebody and the job pretty quickly where maybe before you had to wait a year.
Or people do it themselves to which a couple of comments suggested supposed to that's probably why those phones and covering -- -- more likely not meet -- got home.
That's my Home Depot Lowe's hanging out on -- actually we wonder are they doing all this stuff these little you know.
Upgrades to eventually prepare the house to put it on the market when things turn -- there's.
You know what we're talking at a recent survey said about 30% of people surveyed when feel that when the time is right they're -- about on the market.
-- got to wonder these people are just slowly getting things ready to put that you know to get to the curb appeal which is something he talked about your piece.
Yeah I think there's definitely some of that going on -- -- people who are looking ahead thinking well we can't found out what we're gonna do some little project we kept.
-- curb appeal is huge remodeling magazine says.
Cost vs value report.
Every year and definitely -- project that you can recoup the most.
Money most of your investment at least fell ten to beat those those curb appeal pet projects replacing the citing.
You know getting new window is different things even back in building it back on -- can pay off when you when you -- your home.
So I think that I think definitely people are thinking about that as well whether it's.
Next year and a couple of years when they feel like it's -- go they're safe to go back and right.
We add a comment from John in Tucson he -- the large -- are introducing low cost housing to compete with resales.
-- a lot of builders actually offering deals the -- finance the project confessed so we're starting to see a little activity in matches to help people out get that the content get the market moving again.
Are you seen some of that as well.
Absolutely they're builders do well look I down your mortgage you get it lower mortgage rates back over -- Are ready great mortgage rates right now.
-- you might even get a lower mortgage -- with the help of the elder but they're also realistic a lot of them want to get this inventory off their books.
It because it you know they they it's just sitting there right now so it's definitely Saturday get people moved in and living in this new inventory.
You -- I think builders are very motivated to to make deals on the -- Real estate appraiser Robert in California just wrote in that he's been doing the business for 24 years worst he's ever seen a majority of the business.
Is foreclosure work at this point that's kind of -- comment on this well.
You're -- you're going through some of the little things people can do to make their home more valuable Tracy talked about resales that a question here.
To put -- more specifics on his desk which -- a question of what what's the best thing you can do to make your home more valuable what did you find out from your reporting and talking to people maybe it's a simple.
Kind of a tip that says here's something I can do it doesn't cost a heck of a lot but wanna go to resell my home it's gonna make it worth a little bit more in in a normal world.
You know kitchens and bathrooms -- and the payoff that you can do that on improvements to make your kitchen more appealing your bathroom.
Look like Aaron -- condition and that that will help definitely the curb appeal is huge that the first thing that.
Potential buyer will see when they they drive up to your house you want to make that good first impressions.
I was bogus dollars and in that area.
That's that -- -- -- going to be in but the house for awhile are also as a selling point for for buyers.
The home energy efficiency -- Projects to those not as well and you definitely want to point that out potential buyers this is what we've done.
This is how much we're saving right now because they -- these improvements.
In energy costs and whatnot so I think both can pay off -- -- -- now.
Bubba degrees definitely in the buddy Chris and LA says he's going to -- in my initial guess would have been just heat put color in your house paint.
And -- will curb appeal thing.
I mean HDTV does occur but -- sound like that's a big group and I don't want them to HDTV actually -- -- and watch HDTV and good pointers on how to upgrade their homes -- really really cheap.
When they're not want to fight this course well -- It's kind of interesting.
All right Jamie thanks a lot for coming on really appreciate that ranks up there -- viewers or had a lot of comment -- -- around in dealing with the themselves so all right so as we said object -- -- it was going to join us and we'll.
Was is going to join us from vanguard great to have -- -- for breakfast this morning by the way.
On the -- this is never where there's Jack joining us to talk about.
All things market this Jack I think you'll enjoy the show because we get the viewers interacting with us throughout while we're talking and I'm sure they'll call this -- questions for you.
But we can start with kind of an overall view and we were talking at this earlier of where we are in this whole mess right now I mean you know you get the sense that we're starting to turn things around this account.
We are not really.
I don't see much progress in the economy indeed I -- more signals pointing downward.
But I keep pointing upward and the jobs report was good the retail reported very good.
And in the foreclosure report is bad credit card news is bad.
On the other -- the market isn't stupid -- -- market knows these things are going on so I think we have to differentiate very very clearly our own mind.
Between economy it's going to be trouble for a good while a year and a half two years I don't know how long before it any kind of recovery and I doubt it will be -- a vigorous recovery equipment vigorous recovery.
With a stock market which is that it probably 45% from -- -- now.
Pretty bad conditions and it may have got more or less right we won't know that for awhile but that's not a bad.
Yes Jack even in this business.
Since the fifties you see your father of the index fund is now then the time to get in index funds if this market has got a ways to go.
Let me divide up the question this way out mean index funds or merely a way of buying equities okay.
And I don't think anybody should they are hardly anybody should be all in equity.
Actually we now -- -- much riskier than we expected.
We we've basically got used equities going up by an enormous amounts in the eighties and nineties.
And that now we're getting used to a decade which they have gone down to a lot of risk in equity.
I honestly don't believe that.
The word now fits very well anywhere whether it's an index fund or being in equities generally.
If you -- -- go and equities.
I believe pro badly.
That the index funds by far the best way to do it.
But I like the idea of thinking of your investment program as a long term program.
One in which equities are part of the asset allocation.
And not one that changes a lot over time obviously you have I think obviously.
The -- -- -- you get older.
You got more wealth of state less time to recover from bad problems and -- and in comments all pretty logical to me so more bonds you get older.
And if you're accumulating money in the in the accumulation phase.
I would just continue your plan I would not stop buying your monthly payments in the and equities -- placing your monthly investments in equities to whatever that he -- equity in your program.
But I wouldn't have stopped before and there will be starting now.
I think it's -- kind of as we sit and guard.
-- stay the course got -- thing and it's not easy.
In these times -- but that is the best advice I could yet.
Its interest seeing a question from a viewer here talking about the difference if any when your retirement index funds if for buying an S&P 500.
And for buying and ETF that tracks the SP 500.
What would be the difference for -- -- mean they both tracked the -- -- 500 right which -- which one is better for most investors.
Well they're pretty much the same thing for the investor who buys and holds.
You know the the -- is gonna have a little lower expense ratio.
For for for smaller investors at least.
And that -- -- commission and market impact and spreads and that kind of thing caught them by at.
Study -- is definitely out for someone who's doing dollar averaging just too expensive they should -- the regular mutual -- right featuring some of the OnStar.
Buy and hold.
They fellow wants to put 50000 dollars into an S&P 500 or even better total stock market index fund.
The ETF is probably cheaper to do what.
So that the investors gonna buy it -- hold it.
That we might be a better way to go but only by a small amount listed up finally the go ahead -- finish that thought now at what knowledge they finally.
But he Fiat which is merely a mutual fund that you could trade all -- it's not a it's not like competing with mutual fund that is a mutual fund.
If you want trade all day.
In -- -- my guess.
But don't expect to have much money left at the end the rain here.
Well that's that I thought I was gonna ask you about because now we've had this discussion.
On this show we haven't a lot about this whole Bible verses being an active investor the market and it seems like.
The buy and hold strategy.
Which you know -- would -- -- you can speak to has taken a little bit ahead here in me in recent months have been.
For example there was a big sixty minutes piece on the on the 41 K plans and people are getting hit so hard on 41 K plan.
-- with people starting to question Jack should there.
No they should not and let me tell you why.
First equity should only be as we talked earlier part of your investment program.
And you get somebody who unwisely had all their money in -- just -- there were about to retire.
They either were greedy or got bad advice or didn't realize -- the system -- or -- educated on what to say about that they've had losses and -- it's tragic.
Have of course sixty minutes focuses on things that make you know the world -- kind of worse than it is that -- and the show was poignant.
But I think it just completely ignored the fact that most investors have more balance in the investors they interview so asset allocation again becomes an important part of buy and hold viable bond index fund by an old stock and that's.
Now as the buying and holding stock.
I think people have forgotten a really important back.
And that is as a group.
All of us.
Together our buy and hold investors.
We own and hold the entire stock market.
And we -- -- as a group forever and to what goes on within the stock market is you know we're pitting one investors' interest against another.
And so if you believe buy and hold for you -- is gone.
You know go fight with a -- investors see if you can beat it.
If you can find a broker in picking good stock -- to get by the hot manager.
None of those strategies -- I think is an intelligent strategy.
Because they all cost money.
So when you get your share of the market return to get much less the buy and hold index bastard that's just the mathematics of.
You've been outspoken about this Jack and you actually talked about how.
People get whacked by 401K fees unbeknownst to them.
And that there should be some sort of fiduciary society -- can you tell us a little bit more about your thinking on all that.
Yeah the war we've we've been I think betrayed by our money managers.
I don't think it's too strong a word.
You know who have done two things that are bad one they haven't really acted.
In the sole interest of the people -- money they were matching.
And they have their own interest -- profit making company.
They were for financial conglomerates that own mutual fund management company and they want those conglomerates to -- a return on their capital.
Not having mutual fund shareholders earn a return on their capital -- wanna do that.
But the more they get the more money they make the less money their mutual fund shareholders -- the more money that.
The financial conglomerates of the money managers make less money their shareholders night.
Though the interest of their principals who -- -- mutual fund shareholders -- beneficiary.
Has not been served.
The other part of it is that we have betrayed not just -- -- of Powell's.
These guys whose money were managing.
-- our principles.
Are long idea long term investing has been abandoned in favor of short term speculation.
And this is the most speculative market we have ever had history -- that state.
Three times that turn over nineteen point 910.
Times that turnover -- -- -- in this business which creates a lot of money.
For brokers and investment advisors and mutual fund managers.
But cost a lot of money in mutual fund investors.
So we need to return to putting our principles first PA allies first and going back to our investment principles.
Of long term investing and not short term speculation.
If we had a -- that you.
A federal standard if you will -- fiduciary duty.
Figure investors come first and we be analyzing companies and much more care we debate we'd be demanding that our portfolio companies.
The operated in the interest of their shareholders that -- us.
And our shareholders we in this business and that we have a huge improvement.
The system all right so -- -- you know hypothetically speaking of a lot of those things end up happening in the long run what's going to be the biggest difference about the world we live and you know coming out of this vs how we went into it Tracy and I were talking or somebody brought up the term earlier about how.
If people -- -- sure if they were able to get through the Great Depression right in the dividend and the and they changed the way you -- -- -- your grandfather and coffee -- this is still today's topic has -- -- -- is different because of it are we going to be different jackets you know as Americans because of what we've gone through here in the last two well I guess six months or more.
Yes we will be very different.
Will become and will force our managers to become long term investors.
And not stock market gamblers.
-- in my book the little book of common sense investing I have a statement.
That surprises people when I get it to them and then they nod in agreement about 12 that is the stock market is -- giant distraction.
To the business of -- best thing.
Well of course it is that gets us thinking about a moment.
About prices rather than values.
About the short term rather -- the long hair and all those things are counterproductive and costly.
So what has to come out of this what will come out and ultimately we will only act we investors in our own self interest with a little help from a federal fiduciary standard.
Is -- will then be acting in the capacity of investors we won't be doing all -- trading volumes will come down.
Money management fees will come down and instead of taking 600 billion dollars a year out of the pockets of American investors.
As our financial sector did couple years back.
The number will probably get -- -- stuff like 200 billion.
Which is not awful lot of money to pay for liquidity.
And current pricing and efficient market.
But it's a lot less than 600 billion saw a much smaller financial system and much less trading activity.
Some tech note on a lot of time left with you but what's that what's that take away then for the investor right now I mean how much longer do we have to wade through this and really what should we be doing.
Well I think in the investor have to try and realize a couple of things one that like all the rest of us each investor must realize.
That these that the times that try investors souls and this kind of pressure is great pressure to act and do something.
When news gets bad.
When news gets bad stock prices are cheaper and you probably should do the reverse of what your instinct that it -- try and stick to your plan.
But make sure your asset allocation is right.
And make sure you understand.
Not just the probabilities.
Of future returns.
But the consequences to you if those returns don't come true.
That -- don't come through and -- realized.
Right and let you know that brings up a larger point I wanted to ask about anyway I'm glad -- -- you kind of brought it up here is that.
Here obviously the baby boomers are -- hitting retirement and a lot of people -- ball.
What if we really hit into a long term.
Stagnant market -- one that goes down -- mid sixties and early eighties you market really goes nowhere and it comes just at the time and all these people are.
Hitting the retirement age and try to save for it and that could cause some real big problems in this country right I know we're talking about positioning ourselves an asset allocation and everything else but you could get pretty scary if all those things hit it that the.
-- time now.
Well you know I honestly never worried much about what -- -- -- demographic issue and stocks have a certain inherent value.
Act and sometimes those market prices get ahead of those values sometimes those market prices are way behind those values.
But in the long run the value we get.
Through the ownership of stocks and for the ownership American business is dividend yields and earnings growth.
-- dividend yield is now a little over 3% with the dividend cuts were expecting this year.
Earnings growth should be about the same as our economy may be from these levels five or 6% little better in the economy.
And that should create stock returns over the next decade don't don't think -- period any shorter than that of -- in the area.
And maybe they'll be a -- because the demographics they'll be valued at a little bit lower PE.
So maybe you can look for 78%.
Return on stocks over the next decade I just -- -- yep that's the probability.
But if you you if you -- you can't afford to lose one more penny in the stock market there's only one piece of advice I can get it and that's get out.
The -- place for gambling.
Yeah if you know if you can't take the heat right all right Jack Bogle thanks very much for coming -- we really try to attack from vanguard there with us and thanks everybody for all the questions here -- we have.
But about twenty minutes left in the program we're gonna get the -- mcdonalds here on.
Her big story of the day with the that this is a big topic on on the bank hey Liz -- you have and I feel like puberty get fired up about this the FB ID here.
Is that the Obama administration according to the Wall Street Journal really wants to take a look at executive pay not only for banks -- -- TARP money but maybe for banks that did not.
That's right and what we're talking about is is that Washington has been upset.
The thinking is is that you know executive.
Hey an excessive executive pay and bonuses helped -- for the -- led to the collapse on Wall Street.
And attacks her balance and never drink twelve billion dollars was paid out in compensation from 2002 through 2008.
But -- conversation has paid out.
But people says some piece of fake paper profits at Wall Street built on -- paper.
You know derivatives that really didn't have any value and even that may be debatable but we're talking about here -- -- bring up the -- the most important point.
And that is is that not just talk banks but none -- banks and not part brokerages could be roped into these new executive pay rules also we're hearing that possibly hedge -- product private equity firms.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- To do it all morning Goldman Sachs Lloyd Blankfein is very -- look.
Make more of executive pay stock based because that'd be tied to performance and -- you cover corporate governance issues this is been sort of a trend for a long time.
But you know it doesn't matter it's tied to stock because he can -- -- up the stock price with artificially.
Boosted you know Turbo charge -- -- so busy you know what I -- they have to do that's a good question and idiotic question to his house financial services here.
Quite frankly -- said he may pass legislation to do just that amazing new rules coming up by Memorial Day -- it may be too soon.
We're soon after in other -- the other issue too is in May not need legislation -- -- because it just go ahead.
And change the rules by itself.
But -- big irony here is is that remember this'll start of the AIG bonuses Merrill Lynch bonuses boxes -- -- ten million dollars in bonuses retention bonuses paid out of Fannie Mae and Freddie Mac.
Which are now government you know in the government conservatives -- program.
The government has taken them over so -- hit you know rain in the -- there I didn't do without these other angle comes off that if it's nasty statement no cap on the money they originally gave that 400 billion dollars in taxpayer bailouts are -- Watch it all right thank you listed as though it was McDonald I routers today are you later.
I'll take it a deep breath here and look at the markets for a moment Jack -- spot right I think the viewers enjoyed -- -- -- question.
Frankfurt's old scenes you can sit and listen to -- you have.
That's what I.
We're down but today we're down a 155 point seven -- were talking we believe what we -- back and forth between.
Short term market is down long term yet because yes that.
That Jack brought up what they were a lot of them and then it seems like.
This is this idea I thought -- -- posted on -- board of the -- that we've been betrayed by our money managers was kind of uninteresting.
Topic and this idea of where can you really over the long term beat the market or are you better off an index funds which has it been and that's a debate that with that -- -- It's interesting that this is happening now because this happened after detect -- as well during the tech whom nobody cared about the fees they were -- because they were making ridiculous amounts of terror.
On their funds mutual funds and a break that back then.
As we took to -- about the holders with the big being the Biotech holders all those were big -- of people put their money.
And then all of a sudden it became -- can -- market tanked.
And give us are actually look at their statements again and realize that you know what I guess but I.
What are the -- had a bunch of select funds electronics on things like that they would charge and -- 6%.
-- -- -- -- a lot of money when you're losing money it is and -- don't well we're almost seeing the same -- weekend well we architects say now that hey this got a little money for me exactly so it's very -- how this can't this argument comes up often and yet nothing seems it's on the.
Nothing seems to get done about it that is when you paid fees are at there's a statement.
And that's the moral of the story that is a good and what's always should should always be -- and open to us.
Nobody does except when things -- bad and they're losing money and they -- to know where every -- close what what which is a good thing when that goes back that thing about people saving maybe it's a good thing long term that we civil Bordeaux but not the help without much and they.
And it in the short term so that was.
That was that was kind of interest -- -- we got -- -- hopefully we'll get on the on the program again so again we have and we look forward to taking more questions from the thirteen minutes left now good time to talk.
Two -- -- -- joins us tycoon.
Publishers I screwed up the website less than it was on ETF master trader dot com that's right that's right -- -- all our viewers will post a link to that you can see with them.
Think he's doing out there in the back with the Pennsylvania pizza and -- -- -- -- -- headquartered but he comes in the New York for the big city.
Good to see you would think it Jack Bogle did you listen to a little bit because you try to beat the market he says nobody can beat the marketable.
Of course he says that he pitches in that spot inside of course you say.
He didn't kiss your best that you got to do Olivia and yes absolutely I -- what -- what about that argument.
You -- you've really got to know your game you got the average investing goes out there you know very excited to put their money to work but they don't necessarily take the time to learn.
How to successfully run their own money for an investor like that you are better off index investing I mean Warren Buffett said it best if -- just don't want to think about you're investing.
You know put X amount of money every year when the S&P 500 now.
Absolutely even now because look at some point the earnings -- the S&P 500 will turn around and if you've got a long enough time -- You know if you if so your your thirties you know you know you're not gonna retire -- -- thirty years if you put your money every year and the S&P 530.
You gonna have about 11% compound rate of return -- more than enough of a return to retire on if well let's.
Bit if the people start questioning that lately right that's -- we were talking about Jack is that what do we are going in one of these really -- down periods also on what we're in nine years -- going down period if you look where the market wasn't 2000 where it is now we've essentially been in.
A sideways trading market -- has been very little net new for appreciation.
You know Jim Rogers the -- commodities guy he's you know he's very famous for saying that he may have these alternating markets and commodities are running.
Equities just don't do as well so he says usually those periods last.
Fifteen to twenty years so if you believe Jim -- has been on the five or ten more years of really underperformance for index investing index investing.
Probably won't be that great for the next several years if -- -- have been screaming about how the American economy's awful for years and -- just.
-- -- why China and -- and he's he's been I eventually come to term he he's been absolutely right.
But this is really a stock pickers market -- -- something I wrote about today we're still very much in a trader's market -- sector based market.
The sectors -- just kind of rolling in and out of favor you really just can't go out -- -- by blindly and the last.
You have a twenty year plus time -- -- and in that case by the S&P 500.
How do you to do this year we had a Kathy Boyle was on with us yesterday I was so it was interesting because we talked to fund managers as you know all the time and -- became -- -- but I got hammered last month I was -- she chances of logic that.
You know she still pretty negative on things that she was short on the market went up she says she's actually -- -- -- -- -- she got killed on.
Well -- what kind of positions have you guys been taking.
We went along I mean across the board in February were a little early to a lot of abuse from going long in February when -- -- -- more and -- we just source.
Secular and we do a lot of sector -- stuff.
We just -- sectors trading at levels that.
They shouldn't be trading -- I mean but it was across the -- what effect.
-- -- You know we we source steel not a single steel stock was -- -- buy signal which you know is a contrary and it was it was ten and we can take a look at this.
Retailing restaurants restaurants which is completely demolished.
And that we went along we went on February 1 in March and we started taking money off the table over the last three weeks here.
As the market started to kind of what we think you know really get ahead of itself -- 8500.
So would you recommend then and now people create an ET FB portfolio.
Absolutely yes sir great way to be able to go in and out of sectors as they move out of favor right now -- you -- these people need to understand they pay fees every time they change anything or they dubbed let's average into -- -- -- -- like this stuff.
If you do it's like the stock which it traits like -- stock.
The beauty of it is unlike.
-- mutual fund.
You don't have these massive fees and and this and this liquidity you've got to wait till the end of the day before you consolidate.
ETF you could move in and out of it and if you're sector based trader which is what we are.
We love ETF to me right now.
We're not buying anything right now everything that we look at is kind of overpriced but let's wait for pullback and then you know when we get that pullback will be buyers again.
Its interest and always talk about buying -- now -- ETS three can you can go short right and our guys end up in so how much exposure should people keep on.
To those in an environment like this and because we talk on the air a lot about how people sometimes forget about.
Limiting their exposure to the downside in some -- and you could do it three TF it's much easier than actually borrowing has started.
Having actually -- -- -- -- again that's something new that we can we Houston especially China there's a lot of great.
In -- Chinese ETS.
A lot of different sectors have been Hershey kiss specifically the finance guys -- FAZ which is that three to one trader which you don't just make a ton of money.
Trading that so yeah absolutely they they have a place in and it's probably a safer place.
Being everybody TF thing going out and shorting individual content can't create a perfect portfolio right now they've -- for theatrics not -- I'm glad I found.
I'd say quote right right now we that we don't wanna go really -- anything we're actually up bearish on the restaurant sector.
After having a great run that started -- really kind of fall apart you know McDonald's has -- -- that we don't like.
That we think probably goes -- here.
But right now what we're doing is again really waiting for this market.
To see how far comes back what about -- We don't really technical wild when -- stuff as -- -- just I am like that are we don't try to you know -- we just don't see the growth removed the corporate spending is not going to be there.
You know everybody's talking about -- you know we're looking for the recovery but.
And where it's just recovery coming from and how big -- recovery you know are we gonna see and how much of it has already been discounted in this -- -- but you're right because a lot of people were looking for the tech sector to pull us out of this mess and so far it's been a big disappointment but do you see any she mentioned in an activity.
Consolidation and you see any -- it's just yet like any time you see big banks finance companies coming to market with tons of secondaries.
You kind of run for the hills because these guys -- experts -- don't think expensive stock on to an unwitting public.
So let's look at the bank's first second -- -- the banks are going out.
Issuing more diluted stock.
Speaking -- -- -- into an economy that clearly look at the retail sales numbers here the consumer you know he's still in bad he's not getting out -- any money.
So it is so I don't then we've got guys -- talking about this morning how to get a completely revamp the rules around thanks so.
Profitability is getting sucked out of banking industry is going to be more regulation we've got more stock.
Into a soft economic environment I would I wanna be one bank -- why would I want it.
Do you wildly bullish right now in the stock -- -- this is not enough.
For me to say art let's sit there markets overlooked -- and then go along and forget about it for twenty years so then what's the -- do you think's gonna turn first is that the discretionary use.
People start to come back to those in the consumer staples haven't done all that much certain nothing's really rocking anybody's world right now.
-- that as I said right now we we went heavily long in February and march.
We've been net sellers of stock into this rally and we really just sitting on the sidelines I'm actually looking to put some short positions on.
Probably in the steel sector I want to see that coming a little bit more.
I think there's great opportunities to make money on the short side and steel coming up.
Great opportunities to make money on the short -- and in restaurants I think we're gonna come to the other side of the sentiment driven rally here where people say.
-- that it's really not as good as we thought it was going to be at the very minimum will be at the trading rally there on the downside to catch some good money making opportunities on some short.
Where would you be on that other commodity side of things because the thinking is that.
You know that oil for example become kind of a proxy for the economy and the economy really turned maybe oil keeps going up but if not -- -- had run sixty here -- that you go longer -- it's like a lot of it's a double edged -- because if oil goes -- it.
Plunges and knife in the heart of this economy Bryant hit the down economy is really started consistently get a little better.
Because people want paying final accounting gas you know that's a huge.
You know emotional impact for the average person when they go to -- something you know.
See gas at two bucks to twenty people feel a little bit richer maybe they buy that extra you know item at Wal-Mart.
Five bucks they don't so again I think it's a double what sort of if I if I -- oil seriously break out above sixty I would get.
Very very bearish and just start selling everything right now which is selectively bearish.
Selectively -- that's interesting though because the oil trade and it's been I mean obviously not from where was at 150 but still to get back up to sixty here.
If you if you think and what I wonder what the next move is there and what about gold by the way.
-- looks like -- really wants to go.
Make another run at a new high that's another thing that you have concerns me and people say don't worry about inflation.
Actress you know.
That you look at them for what you look at the price of gold people worried about inflation with -- -- -- GO DC TF people that would their wallet.
You don't know what their mouse so somebody says don't worry about inflation and I see gold going opposite hole when I gonna take a look at this so.
All the precious metals look like they're going higher clearly when you print as much money as the federal government has done.
How can not have an inflationary effect at some point you look at the chart on the US dollar.
Very very scary place right now if you see the US -- back off.
A little bit from here it'll break through major support.
And then at that point you've got to go net bearish across the board because of the US dollar collapses.
Oil prices are gonna go on gold prices are -- -- everybody's profit margins are gonna compressed even more this can be no reason to be now.
Want to know that's Armageddon okay -- where we don't know.
This -- to turn at some point.
But -- the key thing here right now is.
Is this pull back to the markets experiencing.
Going to be a short lived pullback.
An opportunity for the markets to -- like higher or is this the end of the bear market rally.
And we gonna go retest the lows and I can't answer that question yet.
So far -- -- outside so it quite where we're on -- -- so far as I said we see week is developing the restaurant stocks.
Which doesn't seem a weakness development in the -- secondary consumer you're saying.
Part that's is that he'll -- the infrastructure station that our LA restaurant where it was -- -- see the China the restaurants snaps and towards the downside.
If we start seeing more and more sectors start to break down.
And we could say hey you know want it looks like we're gonna make another run here.
-- we go all the way back down 6500 but it's too early to tell that right now.
Now and that does so.
She'll just play it out for the next few months right that's right collectively you've got to be pretty nimble and I was curious your thought about or traders exactly -- -- -- -- you didn't know him because you don't think about that.
I don't know at least I don't with somebody who retirement ETFs we think longer term for whatever reason because I guess -- they're associated with sectors but.
Even do the whole point -- the ETF has doesn't get you that ability and they don't really need you need it and now you can ensure that you can trade AME you can do anything it.
It's a huge boon for the individual I mean right I mean.
You know something that I will be bullish on on the on the next pullback would be Asian banks.
And also Asian infrastructure come companies I think.
That -- of the world is gonna bounce back much faster than than we will if you remember back in the eighties you know Japan was high and mighty.
And when the US stumble you know Japan kind of -- it over us that they stumbled.
But that was just a little stumble for us and I think that's the same thing that's going on in Asia and -- Japan went on I -- this twenty year bear market I think now the roles of kind of reversed I think in China.
You'll see that they're more could probably outperform -- going forward.
What do you think of the health care sector with all the stuff that's going on President Obama.
It's his new plan you know health care has really been placed EC biomedical -- -- -- -- -- up and and -- and that's the reason why is this.
Can -- please use that as a place to hide out.
For market volatility and that's why I think some market volatility might be coming I think health care in the United States.
It's -- on the goat in a radical changes they've got a mandate to do that now.
It's really difficult to have any kind of earnings visibility there I personally don't plan because I can't see.
You know where that's going to go but I think it's really going to be more defense supply I don't you see radical moves in that area I think it's going to be used as hiding place.
For money when you see volatility of current board more.
In the -- -- not -- little flat tax yet in the in the big performance that's correct.
-- always great to see you thanks for coming in and ETF master trader dot com we posted a link to the site so hopefully that helps -- traffic but who knows right terrific so thanks for coming on nine he was good which covers some of the topics because a lot of topics in the -- general.
Now we finally satisfied some of our viewers and she did a great.
So thanks for joining us check out the app podcast always available on iTunes and we'll see you back here tomorrow at noon eastern time foxbusiness.com -- -- --
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