Wise words from the conscience of Wallstreet, John Bogle, founder of Vanguard Mutual Funds.
Q: What’s your investment outlook heading into 2012?
A: If you’re investing in stocks with idea of a one-year outcome, you should not invest. You can lose a lot. If you invest in stocks with a five-year outlook, I would think it is highly debatable if you should do that.
With the economy, I’m cautious. I don’t expect a boom in consumer spending over the next two or three years. People don’t have the wherewithal to spend a lot more, and in today’s world, they don’t have the confidence.
Confidence can change overnight, but wherewithal cannot.
Bogle may underestimate the risks of stock investing in general, but in this interview he gets at a leading cause of the market’s instability–speculation–which he labels correctly as gambling.
The tax incentives are all wrong (as were other government incentives). The governments should tax speculation/gambling at a higher rate than investing. It’s pretty simple. If the price to gamble has a cost, less of it will go on. Which hopfully would also dull the impact of gambling/speculation on commodity prices, helping those prices fall in line with “real” value.