Nobody should buy a stock and nobody should buy a bond, said John Bogle, founder and former CEO of The Vanguard Group.
“You’re betting on prices — you’re betting on buying them from those who don’t know how much they’re worth and selling them to somebody who thinks they’re worth more,” Bogle told CNBC.
“That’s speculation and it’s short term. It’s influenced and driven by supply and demand, and not by the worth of those companies whose value lies underneath that stock price.”
Bogle suggested investors learn about diversification, saying the risk in any individual stock or bond is “staggering.”
In the meantime, Bogle said it is fine for the banks to repay the TARP money, but the TARP has not lived up to its purpose: repurchasing troubled assets.
“What the banks got was money to add to their capital,” he said. “People can disagree the extent to which they’ve actually used it to increase lending. But one thing’s clear — there aren’t repurchases of these troubled toxic assets.”
Ten Banks Allowed To Repay $68 Billion to the TARP Fund
Disclosure:
No immediate information was available for Bogle or his firm.
More Insights from the Masters:
- Warren Buffett Buys Big 'Bargains' In Muni Bonds
- US Should Get Rid of TARP: Dick Bove
- Art Cashin: 'Any Idiot' Can Play Yield Curve (For Now)
______________________________
______________________________
CNBC's Companies in the News:
Berkshire Hathaway
General Electric*
- GE Aviation Sees Orders Down 50% in 2009
Procter & Gamble
Bank of America
- Two More Bank of America Directors Resign
General Motors
---------
*General Electric is the parent company of CNBC.
___________________________
