Tags: Bogle | Investor | Speculation | Ridiculous

Bogle: Investor Speculation Has Turned Ridiculous

Friday, 21 Oct 2011 04:37 PM

Stock speculation has reached a “ridiculous point,” making it harder for traditional investors to gauge value, says Jack Bogle, founder of the Vanguard funds and a value investing legend.

“The most actively traded stock today, every day, is the SPDR, the Standard and Poor’s 500 exchanged traded fund,” Bogle tells Morningstar in an interview.

“And it turns over at about 10,000 percent a year. Ten thousand percent a year, and I think 25 percent is a high turnover!”
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A well-run financial system should direct capital toward the best moneymaking endeavors, Bogle explained. Investors use the market to allocate capital to the productive sector that needs capital.

bogle200.jpg
Jack Bogle
(Vanguard file photo)
What’s happening now, however, is more about shifting money back and forth among the same players than finding and rewarding the better companies, Bogle said.

“In a typical year, our financial system has directed $200 billion a year into new public offerings and additional offerings of company stock. We trade $40 trillion worth of stocks a year. That’s 200 times as much speculation as investment,” he said.

The trouble with speculation, Bogle pointed out, is that nobody wins but Wall Street.

“All this trading back and forth, by definition, doesn’t enrich the investor, because if I buy, you sell and vice versa, but what it does is enrich the croupier in the middle, which we call Wall Street, which has a bunch of very angry people sitting on its doorstep as we speak,” he said, referring to ongoing Wall Street protests.

New York Mayor Michael Bloomberg on Friday told protestors in lower Manhattan to expect more arrests soon.

Bloomberg said the city would take a harder line on the movement known as Occupy Wall Street, according to a New York Post report.

The protest has centered on a privately owned Zuccotti Park but has seen support protests in cities across the United States and abroad.

The Wall Street protestors occasionally have marched around town to the homes of New York’s wealthiest as well.

Bloomberg said that the protestors have been reasonable and mostly peaceful but that the continued protests were interfering with the rights of others.

“We’ll eventually have to work something out here,” Bloomberg said.

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Stock speculation has reached a ridiculous point, making it harder for traditional investors to gauge value, says Jack Bogle, founder of the Vanguard funds and a value investing legend. The most actively traded stock today, every day, is the SPDR, the Standard and Poor...
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Friday, 21 Oct 2011 04:37 PM
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