John Bogle

John Bogle, The Vanguard Group, says stocks are likely to do better than bonds over the next decade, but adds that he’s deeply concerned about the country’s fiscal policy. John Bogle thinks its very possible the market will decline twice by 50% over the next ten years.

Video and computer generated transcript below:

that’s okay. at a time when we’re trying to figure when the individual investor is going to get back into the market, how do you convince them to invest now, at the same time telling themstocks may go down 50%? it’s not really so much convincing them to do something. it’s telling them, as we say at vanguard, i’ve said it for more years than i care to count, stay the’s not like putting money into the market now. it’s like having a lifetime program where you’re investing regularly, you’re putting some in stocks and some in bonds. i think always important to have an anchor to windward so those big declines will scare you a little bit less. and a balance fund will protect you on the downside and help to keep you from making behavioralmistakes. so a balanced program. and then forget the noise. in the long run, the noise is a tale told by an idiot full of sound and fury signifying nothing. do you think we’re on the cusp of such a move, given the fact where we are? on the cusp of a big downward move? yeah. i’ve never met anyone who’s done it successfully. i understand. but just as you look at this market. i don’t know anyone who’s ever done it successfully. as a guy like you who have seen many markets, are you concerned given how fast we’ve come and how far we’ve gotten to where we are today? no, not particularly. it’s taken us four years to recover.that’s probably kind of normal in the history of the bigfluctuations in the marketplace. the idea is, don’t worry aboutwhat stocks are doing today, tonight and tomorrow but look out — i look out a decade and it requires some guts to do this. some character. some courage. but i believe if you hold stocks for the next decade — and i use basically simple math for this, scott.and that is, what’s the dividend yield today? it’s around 2%.what’s the earnings growth apt to be over the next decade? it’s going to be something like the nominal growth of theireconomy. say 5%, that may be aggressive. but that’s a 7% basic fundamental investment return on stocks for the next decade, which means you’ll double your money. it’s just a –jack, are you worried about the government, though? say again.are you worried about the fiscal lack of discipline of the u.s. government? yes, i am. does that make things a little different?i am profoundly worried about that. the reality is that we alwayshave som to worry about. and we have as don rusmfeld hassaid, we have the known unknown es and the unknown unknowns. and the known unknown is going to get us through these times. and what must happen — and i can’t tell you that it will — we have to grow our economy out of this mess and if we can grow the economy enough, it will take care of the deficits — i do think we have to do much more on the very long-term changes in social security and medicare. the current situation is the most disturbing part of what we’re doing. and people seem to refuse to touch what we used to call the third rail. now i guess those third rails of politics. we need a little bit morecourage down in washington. i think you know, scott, it’s not easy to find courage down there. we had the campaign that wecertainly still believe in here, rise above, hoping they would dojust that. let me ask you finally, jack, when people debate why we are where we are in the market right now, how much do you think has to do with the fed and how much do you really think has to do with the actual fundamentals of the economy improving? i’d say that going back to the fed and making money so easy in the economy for so long, back in the early 2000s and even the late 1900s, it began back there and continuing to have easy money, extremely low interest rates, kind of brings out theworst behavior — or speculators and those collateralizedmortgage obligations, they’re very difficult to do at high interest rates. but low interest rates, it makes a speculator’s job our market we have far too much short-term speculation andnot nearly enough long-term investment. jack, thanks so much for coming on. thanks, scott. good luck. be well. jack bogle. i agree with him in terms of long-only managersunderperforming the index. i think you can go on and on about managers who have predicted the declines in the market. that’s where i put my money. instead of having to be long. if you’re long all the time — not everybody can do that. not everybody has access — you can find access to it. in today’s big data download, it’s all about the weather and retail. it may have taken a while but the latest forecast from our partners at the weather channel say the nation, thankfully, is due for a winter thaw in mid april. with that in mind, we’ll zero in on the companies which could win from a cabin fever surge. and what are consumers setting their sights on right now looking ahead to a spring thaw. there’s a huge uptick in search for teva sandals, chanel sunglasses and plus-sized swimsuits.stephanie, what’s your top retail trade right now. can i give you two? one is t.j., we’ve liked that for a long time. the management was around visiting with investors recently. they have a very good story to tell. store growth, international growth and doing better in terms of e-commerce. nordstrom is the other one. they’re doing aggressive reinvestment into theirbusiness, also to grow double digits and returns as well. steve weiss? i’m going to assume your closet is now full given thesearches we just saw that you’re fully accounted for. thank you.basically i think you want to stay with what’s been working. that is macy’s, abercrombie & fitch is going to cut costs. that’s one you could play. ith the retailers that have the edge. stay away from the fashion — real fashion. i also like kors. dr. j, a quick retail trade for me? gap because of old navy primarily but also because of ana republic. courtney reagan and her guests will talk about the weather and what’s on the minds of retailers.catch it all today on big data download. coming up next, our traders