Saturday, February 2, 2013

Dow 14,000 Irrelevant Says Bogle

In an interview with CNBC, Vanguard Group founder John C. "Jack" Bogle, said the Dow hitting 14,000 "doesn't mean very much." He added that it's something "I can contain my enthusiasm about....”

The Dow closed Friday at $14,009.79, jumping 149.21 points. That brings the Dow to only about 155 points from the highest closing it has ever had of 14,164.53.

While retail investors have started to return to the market slowly, the fact that they haven't poured into the market is probably a good sign. Bogle said, “When mutual fund investors pile into equities, it's usually a very negative sign for the market.”

For the first three weeks of January, only $6.8 billion in net inflow came into mutual funds based in the U.S.

Concerning the failed Federal Reserve policy, Bogle said he opposes the idea of the Fed attempting to raise the price of stocks, as even if there is some success in that regard, it actually distorts the discovery of what the market is really saying.

“I don't know if anybody down there knows whether they are low or high at any time. I think the Fed should try to stay out of trying to influence the stock market. I think let the market decide.”

This also could be a reason a lot of businesses continue to hold back on expansion, as when forces like the central banks interfere in the market, it makes it more difficult to make decisions because it's harder to project the future probabilities because of the price distortions.

Bogle sees the U.S. economy growing at from 2 to 2.5 percent in 2013.

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