The Bogle Interview
Saturday 10 October 2009
Readers of this blog may recognise the name of Jack Bogle.
In 1976, Jack created the first retail index fund as an inexpensive gateway for investors to enter the stock market -- today Jack is a true legend on Wall Street.
The link to the video is below, but here’s what Jack said when asked if markets recover….
"Markets do recover...The mistakes we make as investors is when the market's going up, we think it's going to go up forever, and when the market goes down, we think it's going to go down forever. Neither of those things actually happen. Doesn't do anything forever. It's by the moment. So there are two pretty different things about the timing, I think.
One is to separate, very definitely, the economy from the stock market. And I would look for a more extended time to take to recovery from this mess that Wall Street and other people have gotten us into over the last eight, ten years. It's not going to be a quick recovery. It's spreading into the economy in a much more rapid way I think than anybody expected.
And if the economy starts to recover in a year and a half or two years, I think we'd be we'd be pretty well served. You don't get over this kind of a disease in a very short time. The stock market, of course, is a totally different idea because the stock market tends to anticipate. And what people who are so bearish on the markets, and I've never seen, I don't think, quite as much bearish as we see now, don't realize that a 50-percent decline, roughly 52 percent from the high to the low creates huge value. And they don't realize the dividend yield when all this started in 2000, that was the beginning of the end, was 1 percent, and now it's 3 percent. Well, that's a 200 basis point improvement, 2 percentage point improvement in future returns on stocks.
Stocks back then, early 2000s, were selling at almost six times their book value of all that plant and equipment and cash and everything else they had, maybe even some patents and good will. And now they're selling at about 1.8 times that value, a tremendous difference. A level of attractiveness that we really haven't seen since the early 1980s, mid-1980s might be fair. And from here, I think it's easily possible that with the earnings quite depressed, depending on how we measure them and count them, that earnings could grow at 7 percent a year, faster than the long-term norm of 5 nominal earnings growth. And if earnings grow at 7 percent from here over the next decade and there's no point."
Want to listen to more..click here
posted by Murray Round Wealth Management @ 11:07,
The Authors
Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
Kirsty
Kirsty is our communication guru. Managing information requires considerable due diligence and her passion for organisation gives the clarity we all seek. From Shropshire, with a Psychology Degree and much travelling, she is now back in Shrewsbury...and London often, keeping us all at Murray Round focused.
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