John Bogle, Vanguard Group Founder Offers Advice for Individual Investors
Monday, September 29, 2008PAUL KANGAS: Joining us now to put today's events into perspective for individual investors is John Bogle, the founder of the Vanguard Group. And, Jack, welcome back to NIGHTLY BUSINESS REPORT.
JOHN "JACK" BOGLE, FOUNDER, VANGUARD GROUP: Good to be with you, Paul.
KANGAS: You were with us just two weeks ago almost to the day, the Dow had tumbled 500 points that day, and you told this crisis was different, that it's going to be tougher than the others we have faced. What is your take on what happened today in the House of Representatives?
BOGLE: Well, it was certainly not much of an act of statesmanship on the part of our elected officials to begin with. And there was a lot of pettiness like blaming Speaker Pelosi's speech on -- for the Republicans to abandon ship. The one thing I did observe, looking at the vote, Paul, is that this must have been the most bipartisan vote of this entire congressional session. It was not so darn far from evenly divided for and against between Republican and Democrats: the Democrats marginally in favor, the Republicans marginally against. So if that is what we get out of bipartisanship, that's not so good. And you know, there is an old saying, there are two things, two things one never wants to watch being made. One is legislation, and the other is sausages. (LAUGHTER)
KANGAS: That's right.
BOGLE: And I think there was a lot of sausage out there today.
KANGAS: But what are investors to do in a situation like this?
BOGLE: Well, first, my assumption is, I hope it's not vain, that Congress will finally pull its wits together and give us a bill. And in particular, I think there are legitimate objections to this bill. I think we should have been much clearer on giving the government options on them -- or equity participation in the banks they are helping. I do believe strongly, it happens to be a Democratic position, but that doesn't matter to me, in doing something about the mortgage bankruptcy laws that would allow a renegotiation under bank supervision of people that are -- you know, are going to be able to pay off their mortgages and can't do it now. And those are two things that should be addressed, I'm quite confident. But it's very difficult to do.
KANGAS: I understand. The market's action itself is just terrible. I mean, do you see a bottom forming here? Is there any hope of that?
BOGLE: Well, I don't know too much about tops and bottoms. The market is now down about 29 percent measured by the Standard & Poor's 500.
KANGAS: Right.
BOGLE: About 29 percent from the high last autumn. And who knows where it goes? I mean, I would certainly not hesitate to venture that we are more than halfway to the bottom. But I think investors should think about, you know, the warnings they've gotten from experienced investors over the years, you know, at the times of maximum pessimism, there is a time to think a little more positively. I was brought up years ago by Walter Morgan, our founder here. And he taught me the lesson: The crowd is always wrong. And what we have now is a crowd of speculators out there. This has, I think, not that much to do with investing at the moment. It's kind of heading to the hills by people who were speculating and maybe we're facing problems with leverage or debt, something like that, margin requirements. So the markets are very, very shaky. I think they overstate the seriousness of a very serious -- I want to don't want to make light of that, a very serious situation.
KANGAS: In your -- if you held a portfolio for a long time, would you hold it, continue to hold it through this crisis?
BOGLE: I do that with my own. I may have mentioned that I happen to be, ever since the beginning of 2000, that market high went back to about 67 or 68 percent bonds, and 32 or 33 percent stocks. And I would hold on. And I would say to older investors, if you have a position like that, with some backstopping, an anchor to windward in the form of bonds, I would hold -- and then very diversified on the stock side, I would hang on through this. And for younger investors, if you have got very little at stake. I would just keep doing your dollar averaging, realize every day this market is low, it is a good time to invest in the long run.
KANGAS: All right. Jack, I want to thank you once again for sharing your insights with us.
BOGLE: Great to be with you, Paul.
KANGAS: My guest, John Bogle, founder of the Vanguard Group.
