Tags: Jack Bogle | investing | Donald Trump | taxes

Jack Bogle: Stocks Are Expensive, Tax Cuts a 'Great Big Mirage'

By    |   Monday, 10 April 2017 11:37 AM

Jack Bogle, the founder of Vanguard Group who is a long-time champion of index investing, says stock prices are too expensive compared with company profits.

“The market is pretty fully valued here,” he told Carl Quintanilla on CNBC. “The important thing to watch is this big gap that we are seeing right now in operating earnings in the future compared to reported earnings in the past.”

The price-to-earnings ratio using generally accepted accounting principles, which exclude several kinds of “non-recurring” income, for the S&P 500 stock index is about 26 times, making the market more expensive than its long-term average of about 16 times. The stock benchmark has risen about 10 percent since Nov. 8, when Republican Donald Trump won the presidency on a bro-business campaign platform.

One of the biggest worries is that Trump won’t fulfill his pledge to stimulate economic growth with tax cuts, especially after Republicans couldn’t muster support to change U.S. healthcare law. Repealing Obamacare, or the Affordable Care Act signed by President Barack Obama, would have acted like a tax cut, Bogle said.

“When the so-called Obamacare did not get repealed, a large tax on higher income earnings remained,” Bogle said. “There's no tax cut there. There would have been a huge tax cut if the law had been repealed. It's a great big mirage as to where we'll come out on the taxes.”

While Bogle warned about current valuations, he said people with a long-term a long-term investing plan can ride out market declines.

“I wouldn't worry about that if you're investing for the rest of your lifetime,” he said.

Bogle started the indexing revolution for retail investors in 1976 when he launched the Vanguard 500 Index Fund. The fund, which just passed its 40th anniversary, had $205 billion in assets as of Aug. 31, Bloomberg reported.

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Jack Bogle, the founder of Vanguard Group who is a long-time champion of index investing, says stock prices are too expensive compared with company profits."The market is pretty fully valued here," he told Carl Quintanilla on CNBC. "The important thing to watch is this big...
Jack Bogle, investing, Donald Trump, taxes
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2017-37-10
Monday, 10 April 2017 11:37 AM
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