Cutting Through the Noise

http://www.cnbc.com/id/15840232?video=490824070

The link above is to an interview on CNBC this afternoon with John Bogle, founder of Vanguard Group. Listen/watch it! There are some classic tidbits in there, including references to Issac Newton and Shakespeare. Here is the bottom line: in his 55 years in the business, he has never seen volatility like this; he doesn't think it means much as turnover in the market has increased from 20% to 150% annually, meaning that this isn't a paradigm shift by real investors but rather speculators "trading pieces of paper; he hasn't made any changes in his portfolio in Six-and-a-Half Years! (60%bonds, 40% stocks...caveat, being John Bogle, all his money is in Vanguard funds, but most of it was in index funds); the Fed is doing the right thing. The concept to take away here is that INVESTORS need to filter out the garbage and focus on what is important. Sub-prime and related sectors are in trouble because credit standards were too easy and people took on more debt than they could handle. This occurred in other sectors as well. Credit risk, in general, abandoned with 'abandon'. Now fear has come back into the market,and, in the case of some players, fear has arrived for the first time. Like Bogle said in the interview, and I've said many times, the market needs to value and revalue all of these assets now that credit risk is back in play. Remember the pendulum; it has to swing from one side to the other before settling on a equilibrium point.