Speaker 1: Global business news twenty four hours a day at Bloomberg
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Speaker 1: This is a Bloomberg Business Flash, and I'm Karin Moscow.
Speaker 1: US Dock Index futures are signaling. Equities may halt their
Speaker 1: best winning streak in five months after worsening economic data
Speaker 1: from Asia reignited concern over the outlook for global growth.
Speaker 1: We checked the markets every fifteen minutes throughout the trading
Speaker 1: day on Bloomberg SNP EMNY futures down eleven points down,
Speaker 1: EMNY futures down seventy eight and NASADAC EMNI futures down
Speaker 1: twenty six. DAX in Germany's down three tenths per cent ten,
Speaker 1: Your treasury up twenty thirty seconds, the yield one point
Speaker 1: eight three percent yield on the two year point eight
Speaker 1: seven percent. NIMEX screwed oil down six tenths per cent
Speaker 1: or twenty two cents at thirty seven sixty eight A barrel.
Speaker 1: Comics gold is up eight tenths per cent or ten
Speaker 1: dollars thirty cents to twelve seventy four forty ounce. The
Speaker 1: euro a dollar ten thirty nine, the N one twelve
Speaker 1: point eight nine and that's a Bloomberg business flash. Tom
Speaker 1: and Mike Karen Mosco, thank you very much. We're talking
Speaker 1: with Jack Bogle. He's of course the founder retired CEO
Speaker 1: of the Vanguard Group, and we're talking about investing for
Speaker 1: for the average person out there. I want to ask you, Jack,
Speaker 1: what do you think of the phenomenon of negative interest
Speaker 1: rates and how they hit the average person. I note
Speaker 1: that Nika, the Japanese newspaper, reporting that all eleven Japanese
Speaker 1: asset managers who are running money market funds are closing
Speaker 1: them because they can't make make them work with negative
Speaker 1: interest rates. The numbers just aren't there. Well, let me
Speaker 1: say this, if this is a pretty much unprecedented it's
Speaker 1: only right now in Japan, although it could spread a
Speaker 1: little further around the world. But Japan has always been
Speaker 1: notable for the very lowest interest rates, and uh, I
Speaker 1: think it's imponderable. Um, the typical saver in the US,
Speaker 1: and is certainly including in the US, has really been
Speaker 1: badly hurt by this dropping interest rates. And you know
Speaker 1: that it's just a toutology that low interest rates are
Speaker 1: great for borrowers and terrible for lenders. And there's no
Speaker 1: way around that that equation, and so there our our
Speaker 1: savers in the United States have been taken on the
Speaker 1: nose for you know, pretty close to a decade now.
Speaker 1: So I don't look at it as a very good situation.
Speaker 1: But I think we're in a period of such low
Speaker 1: inflation that you can't you you aren't going to be
Speaker 1: able to look for much higher yields of the bond
Speaker 1: area for as far aheads the audienc which I quickly
Speaker 1: add is not very far. Jack Bogle, my grandfather, once
Speaker 1: showed me his bond blodder from another time in place
Speaker 1: the twenties, and he showed me the day that he
Speaker 1: made a three percent coupon, and he said that was extraordinary.
Speaker 1: That if you could get three percent, Mike, and not
Speaker 1: two point two five or two and eight, that was
Speaker 1: living large. Is that where we're heading to, Jack, Well, all,
Speaker 1: we're I'm not sure what instrument that is, but they
Speaker 1: is at one point eight or one point nine to
Speaker 1: at one point nine percent, that's very low. But on
Speaker 1: the other hand, what you have to take into account
Speaker 1: is we're in a time but very low inflation, and
Speaker 1: the real yields on bonds and stocks are not all
Speaker 1: that bad. Believe it or not, Mr. Artical standpoint. You know. Yes,
Speaker 1: in since nineteen fifty, uh, the average yield of a
Speaker 1: stock bond portfolio has been about four and a half
Speaker 1: percent nominal. But when you take inflation out of that period,
Speaker 1: the average the average yield of stock in same stock
Speaker 1: and bond portfolio fifty fifty we're using here, is nine
Speaker 1: tenths of one percent um. So there's a big difference
Speaker 1: between four point five and point nine. But it seems
Speaker 1: like it seems like investors almost would rather have this
Speaker 1: gets to the negative interest rate question too. Almost would
Speaker 1: rather have an eight percent return with nine percent inflation.
Speaker 1: Then they would have five percent return and two that's
Speaker 1: some money illusioning. No, that makes no mathematical sense. But
Speaker 1: we look at the real returns, the nominal returns first. Yeah,
Speaker 1: I mean, I'll go that, Mike. Let me quote you.
Speaker 1: This is the Vanguard Total Bond Fund, the legendary v
Speaker 1: b t I X Jeck Bogel basically invented this industry. Uh.
Speaker 1: Fun performance three point four eight two point zero nine
Speaker 1: one point nine three one point six nine percent spread
Speaker 1: out over the last five years. I mean, Mike, we
Speaker 1: forget it's single digit world. Uh, what do you do
Speaker 1: when't You're in a situation as we've found at the
Speaker 1: beginning of this year, when nothing when when everything is
Speaker 1: correlated negatively put it that way, when nothing works well,
Speaker 1: I think what you do is stay the course. And
Speaker 1: I know what you do not do is go out
Speaker 1: and reach for yield and take a lot of extra risk.
Speaker 1: I'm a very strong proponent of staying within the returns
Speaker 1: earned by the bond market and earned by the stock market,
Speaker 1: and then not trying to think you're smarter than the market.
Speaker 1: In my very first book, bobilon mutual fund, I said,
Speaker 1: don't think you were smarter than the market. Nobody is.
Speaker 1: It's to all these opinions come together, and I think,
Speaker 1: what's left out of these factors is this this at
Speaker 1: least consideration there weren't such a low inflation world that
Speaker 1: they're the lowest I can ever recall. And I go
Speaker 1: back a long way, um, and I guess that I
Speaker 1: don't remember what they were in the thirties, I confess,
Speaker 1: but it's the the average return, as I mentioned a
Speaker 1: minute ago on that treasury was five point seven and
Speaker 1: that's a that's a pretty that's a pretty healthy number.
Speaker 1: Compared to where we are today, to say the least.
Speaker 1: But it's a nominal number. And once you take out
Speaker 1: the the inflation, if it comes way to handle less
Speaker 1: than one percent, and so it's a tough time for investors,
Speaker 1: but you have to do something. You know, putting your
Speaker 1: money under the mattress is a good idea, and I'm
Speaker 1: very safe there. Putting in the bank savings deposit is
Speaker 1: going to be having even lower yields about to say,
Speaker 1: maybe a little higher the money market funds actually because
Speaker 1: banks aren't been bound to the levels of the markup return.
Speaker 1: But I think it comes down to stay thought stocks
Speaker 1: and brons and if you don't, if you say I'm
Speaker 1: through with this, I'm gonna put it all in cash,
Speaker 1: who's gonna tell you when you get back in. So
Speaker 1: you gotta be right twice, right to get out and
Speaker 1: then right to get back in. That's a that's a
Speaker 1: that's a bull order. Jack. Good to catch up Jack
Speaker 1: Bogel with Vanguard, of course, and his good work over
Speaker 1: many decades to UH the investment UH knowledge in the
Speaker 1: investment psychology of America. Mr Bogel will celebrate an eighty
Speaker 1: seventh birthday Mike in May, which is a very cool
Speaker 1: and beautiful thing. Yes, yes, uh negative twelve. We need
Speaker 1: to get to get the markets open here in five
Speaker 1: and a half minutes. Negative twelve on futures down future
Speaker 1: is negative eight nine. I don't see much angst out there, folks.
Speaker 1: Mostly it's just a jumble to the market looking for guidance.
Speaker 1: Part of the guidance, of course, is um FED speakers
Speaker 1: coming up as we get to March sixteen. Not really
Speaker 1: going to quiet period, say the least some meetings for
Speaker 1: your calendar March sixteenth, April twenty seven out to June
Speaker 1: fift before we get to the fourth of July. We
Speaker 1: can say that because it is gorgeous in New York
Speaker 1: this week. MIKEL McKee and Tom Keane, this is Bloomer's surveillance.
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