Yale economics professor Robert Shiller on the death of Vanguard Founder John Bogle and how the partial government shutdown is affecting the U.S. economy.
H/T Dataroma
Shiller On Bogle, Economic Impact Of The Partial Government Shutdown
Q3 hedge fund letters, conference, scoops etc
Transcript
This is my opinion but I'm really going to say it the most honest financial giant on Wall Street has died. John Bogle founder of the famed Vanguard Group died in Bryn Mawr Pennsylvania last night. He was born the year of the great crash in Depression 1929. I was honored to know John for 20 years. He cared deeply about his customers at Vanguard. Bogle fought bitterly and often and hard against high fees and he was the king of index investing where people could have exposure to the markets but didn't have to pay so much for it. John Bogle was eighty nine years old and he will be missed. Joining us now in a Fox Business exclusive Nobel prize winning Yale economics professor Robert Shiller also the cocreator of one of S&P CoreLogic Case Shiller National Home Price Index. And I know that you were a compatriot of Jack Bogle's must be a tough day for you.
Yeah well I admired him.
Integrity is his living. He was living proof that there really is a long run good strategy. He argued it goes way back to his undergraduate days at Princeton. He wrote an essay about mutual funds are they serving the public all through his life. He was working to make them a better service to the public and ultimately paid off.
So right. I mean he had integrity. He was that honest guy on Wall Street. I'm glad I wasn't overstating it but he was just one of the greatest. Let me turn and shift to what's going on right now and we want to pick your brain a bit. First on the economic effects of the partial government shutdown to the Trump administration had to rejigger its initial estimates and now it is pretty much double what they had thought would be the attack on the GDP. It's now going to be they say .13 percent each week that the partial government shutdown goes on that is knocked off GDP. Is that what your research models are showing you.
I'm interested to know higher lower Well I would say I'd like to suggest a longer term. The . 13 percent you describe is short term inconvenience. I'm a little bit annoyed. I'm leaving for the World Economic Forum next week. I don't know if I'll get there with the possible T.S.A. problems. I probably will. It's that kind of level of annoyance that the short run impact is. But the longer run impact is a loss of trust and a sense of polarization that I think inhibits really good business dealing. That's hard to put a number on but ultimately one thing that's great about America is that for centuries we have trusted each other and we have held we have stayed within the rules and we play honestly that ultimately is is damaged by the kind of discord that we see at this present time.
So and I'm you know I deal in numbers here. I'm interested because if this goes on for a quarter suddenly GDP goes from what people hoped would be at least two and three quarters percent to zero I don't know that sounds high to me but it depends.
We'll watch and see how it goes. Right now it hasn't affected except for the government employees it hasn't affected most of us very much. I really think we have to think long term and that's one thing that Borgeaud I think and you mentioned before was advocating in the long run. We have to stay the course and stay true to our principles.
All right. Let's talk about the principles of the housing market. You call the current boom in housing gigantic. What do you see as a big threat though. Because the housing boom for this modern era seems to be slowing just a little bit here as interest rates tick higher. Are we going to see some type of bubble burst on a smaller scale certainly from the financial crisis. But if so when and what would trigger it.
Yeah I figure that just looking at the magnitude of home price increases we are going through the third largest boom in home prices since 1890 there was 42 1942 to 47 boom and then there was a 1997 to 2006 boom which were both bigger. This is a pretty big boom there I think. To me it makes it the outlook are uncertain. If you look at a plot it looks very reasonable to suppose that home prices would fall substantially in the next few years. That's that I think that's a possibility. On the other hand these things are hard to forecast and home prices are still in real inflation corrected terms overall not even back up to the level that they had in 2006.
OK well that's good news. I mean we certainly don't want to see that kind of froth but thank you so much for joining us. You know are you worried at all about anything anything keeping you up at night is it student debt.
Student debt is a significant problem for a fraction of the population in terms of predicting the housing market it's a factor but it's not a huge factor. The total student debt is about one and a half trillion dollars at this time which is dwarfed by the size of the housing market does affect does affect starter homes and young people's decisions.
So in some cases heavily it's a concern. It is I know.
