WEBVTT - Bogle: Don't take risks to get higher returns

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>This is a Bloomberg Business Flash. Good morning, I'm John Tucker.

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<v Speaker 1>The Bloomberg futurest Report. Now thing blunted by Interactive Brokers

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<v Speaker 1>and c M A group. If you're looking for global

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<v Speaker 1>futures contracts with low trading costs, look no further Indranted Brokers.

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<v Speaker 1>The industry Leader learned more at the drafted Brokers dot

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<v Speaker 1>com slash. C m E grew up ahead of the

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<v Speaker 1>FED decision today. Getting some readings on the economy right now.

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<v Speaker 1>Industrial production these are month over month numbers down four

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<v Speaker 1>tenths of a percent after the seven tenths of repercent

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<v Speaker 1>rise in the prior month. Right now, also capacity utilization.

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<v Speaker 1>The numbers coming in a little weaker than what the

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<v Speaker 1>analysts expected seventy four point nine percent. The expectation was

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<v Speaker 1>for seventy five point two percent. Futures appeared some earlier

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<v Speaker 1>games has some few futures right now two points higher,

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<v Speaker 1>that's up a tenth of a percent, to down futures

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<v Speaker 1>up thirty three that's up two tents and as they kee,

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<v Speaker 1>mini futures seven points higher. That is up two tents,

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<v Speaker 1>up a percent. We check the markets for you every

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<v Speaker 1>fifteen minutes during the trading day right here on Bloomberg Radio,

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<v Speaker 1>Michael and Tom. All right, John Tucker, thank you very much.

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<v Speaker 1>Taking a look at some of that industrial production numbers, Tom,

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<v Speaker 1>it's banned across the board, and not just a headline number,

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<v Speaker 1>but manufacturing down four tents. You would like to see

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<v Speaker 1>a rebound in that area. This is a May number,

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<v Speaker 1>and we had seen weakness in manufacturing over the last

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<v Speaker 1>couple of months. A lot of that motor vehicles off

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<v Speaker 1>four point two percent. Utilities were down eight percent. Of

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<v Speaker 1>course it was a rainy, yucky May, so not a

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<v Speaker 1>lot of energy generation. Mining here's an interesting one. I

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<v Speaker 1>want to go back and look at this because are

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<v Speaker 1>the chart I have in front of me doesn't go

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<v Speaker 1>back far enough, but it was up two tenths. When

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<v Speaker 1>was the last time mining was up was August of

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<v Speaker 1>last year. I would look at capacity utilization, which is

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<v Speaker 1>maybe the most fossil like chart, most ancient chart that

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<v Speaker 1>we have, and the vector down is getting back near

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<v Speaker 1>the bottom of the two thousand one recession. It is

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<v Speaker 1>an ancient chart, capacity utilization, which means we must speak

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<v Speaker 1>to an ancient gentleman with terrific wisdom and perspective. Who

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<v Speaker 1>would that be, Mike, Well, he's not an ancient gentleman.

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<v Speaker 1>He's an investor of a certain age. Yes, and well

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<v Speaker 1>and well preserved. We might Bogle the founder of Vanguard

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<v Speaker 1>UH and things have changed in investing over the years,

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<v Speaker 1>and yet you are arguing, as you always have, that

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<v Speaker 1>passive investing still is the way to go for investors.

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<v Speaker 1>Never mind all this quant stuff, never mind umping in

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<v Speaker 1>and out to arbitrage small price opportunities. By and hold forever,

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<v Speaker 1>basically is your advice, that is my advice. By and

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<v Speaker 1>hold a total stock market forever or equity position, and

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<v Speaker 1>the total bond market for your bond position. I want

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<v Speaker 1>to congratulate you, Mr Bogglan. You know you and I

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<v Speaker 1>have talked many times over the years of your wonderful

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<v Speaker 1>speech in Washington. You're important speech to the Institute of

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<v Speaker 1>Quantitative Finance. Did they throw their crape susette at you

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<v Speaker 1>while you were speaking? How did they greet That's a

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<v Speaker 1>that's a great question, Tom. And then the reality is

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<v Speaker 1>that the audience was very intentive. Attentive gave me a

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<v Speaker 1>not not a standing ovation, but a pretty nice ovation

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<v Speaker 1>at the end. And I talked to those quants down there.

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<v Speaker 1>I'm in the guess the majority of them, and maybe

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<v Speaker 1>the vast majority of them when it comes to their

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<v Speaker 1>own money, are investing in Vanguard index funds. Listen to

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<v Speaker 1>you promoting what's the pragmatic school? Do your pragmatic school?

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<v Speaker 1>What do you do given negative interest rates, new low

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<v Speaker 1>terminal values, and frankly great regimes that a young John

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<v Speaker 1>Vogel knew, Well, yeah, we had that during my career

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<v Speaker 1>in this business. Uh Now, sixty five years or so,

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<v Speaker 1>or soon to be sixty five years, I should say,

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<v Speaker 1>the average return on stocks has been around twelve and

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<v Speaker 1>the average return on bonds has been about five. That

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<v Speaker 1>is not going to be true in the future. You

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<v Speaker 1>may not like the fact that it won't be true

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<v Speaker 1>in the future, but the fact is in best we must.

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<v Speaker 1>You know, what are you gonna do with the money

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<v Speaker 1>that you have your regular investing or your capital your

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<v Speaker 1>capital fund? And do you take it out of the

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<v Speaker 1>markets and sit on it In the long run That

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<v Speaker 1>is a bad idea. In the short run, it may

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<v Speaker 1>be a great idea, but who knows where the long

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<v Speaker 1>the short end. So um, it's uh, it's accept the

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<v Speaker 1>returns over it by the market and don't take risks

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<v Speaker 1>to get higher returns, whether you're talking about bonds or stock.

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<v Speaker 1>And that's not a very palable thing. I mean, I

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<v Speaker 1>think it's reasonable to reasonable think that stocks might return

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<v Speaker 1>four to five percent in the next decade. And it's

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<v Speaker 1>reasonable to think given the very low level of interest

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<v Speaker 1>rates that then your treasury is around one point six

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<v Speaker 1>percent or something. You have to buy that when you

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<v Speaker 1>can go longer. You can on corporates, but Jahn probably

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<v Speaker 1>get around it two and a half percent, you on bonds.

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<v Speaker 1>So balanced portfolio is going to produce you know, maybe

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<v Speaker 1>a three percent return something in that range. That's the fact.

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<v Speaker 1>And there's another fact that time it's even worse. And

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<v Speaker 1>that's before the cost of investing. And if the return

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<v Speaker 1>turns out in the balanced portfolio, you know, I could

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<v Speaker 1>be a little on the low side. I don't think

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<v Speaker 1>I'm gonna be um on the high side very much. Um.

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<v Speaker 1>When you take a couple of percentwich points, which is

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<v Speaker 1>what it course you to all mutual funds, you take

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<v Speaker 1>that three down to one, I won't come in on

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<v Speaker 1>tax in effie of most mutual funds, but it's every

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<v Speaker 1>bit of one. So it's you just do the best

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<v Speaker 1>you can in the environment as it exists today. Take

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<v Speaker 1>what's there and don't reach. Don't if somebody reserved once. Um,

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<v Speaker 1>if you've lost in the first seven races, don't take

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<v Speaker 1>all your money in any any anything you have left

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<v Speaker 1>and bet in the favorite in the eight. It's not

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<v Speaker 1>a good it's not it's not gonna be. Yeah, but

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<v Speaker 1>any time period, you know, you could still catch a

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<v Speaker 1>rising knife. I know what's you know, a star treker.

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<v Speaker 1>You could find something that will make you a lot

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<v Speaker 1>of money. And that's the always the kind of the

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<v Speaker 1>grail for people. Well sure that's the grail for people.

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<v Speaker 1>But the reality is for every stock that beats the

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<v Speaker 1>total stock market, there is essentially not quite this simple,

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<v Speaker 1>but almost there's a stock that loses to it. So

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<v Speaker 1>if you're sure you can always buy the winners, please

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<v Speaker 1>be my guests. But I've never been anybody check Bogle. Well,

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<v Speaker 1>have to leave it there today, shorter day because of

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<v Speaker 1>FED day. Thank you so much, greatly appreciate it, and

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<v Speaker 1>folks that really commend to you. Mr Bogel's speech to

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<v Speaker 1>the Institute for Quantitative Finance at Washington, uh here a

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<v Speaker 1>few weeks ago, Mr Bogel, I believe is with vanguard

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<v Speaker 1>in shape and forms futures of four down features of

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<v Speaker 1>thirty nine. I haven't mentioned oil today week or Brent

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<v Speaker 1>down of dollars seven seventy six. We begin our coverage

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<v Speaker 1>of FED Day at one pm this afternoon, counting down

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