Jack Bogle might be one of the world's strongest advocates of index investing, but that doesn't make him a fan of exchange-traded funds (ETFs).
Indeed, he thinks ETFs have largely served as a vehicle for the stock market's recent volatility. The CBOE Volatility Index (VIX) has soared 33 percent since the S&P 500 index hit a record high Sept. 19.
"We are in a speculator's market," Bogle tells CNBC
. "The value of American business doesn't change by percentage points day after day."
And it's ETFs fostering the volatility, he explains. "I took a look at the most actively traded stocks yesterday [Wednesday]. The 12 of them traded $60 billion, and $50 billion of that was in ETFs. So they served the speculator. I'm not at all sure they served the investor."
"The market is very exuberant. I don't think overly so. Exuberant and confident," he adds. "Risks are high. Investors ought to be very aware of those risks. I would say at these levels, don't do anything. Just stand there."
As for the outcome of the Federal Reserve's massive easing program, "we are very close to the best-performing developed economy in the world. Give the Fed credit for that," Bogle remarks.
"The hidden secret is that what is great for borrowers is terrible for lenders. There is no way around that eternal tension. This is a terrible time for savers." They should consider intermediate- and short-term bonds, he suggests.
Some others are more critical of the Fed.
For example, Richmond Federal Reserve Bank President Jeffrey Lacker and the bank's research director John Weinberg say the central bank is overstepping its boundaries and distorting credit markets with its huge purchases of mortgage bonds.
"Central bank legitimacy will wane without boundaries on tools used for credit-market intervention," they write in The Wall Street Journal
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