Bogle on the market: 'Sound and fury...'

We had a great conversation in our second hour today with Vanguard founder John Bogle and economist Jared Bernstein. Here's an ear-catching exchange, right off the top, between Tom and Bogle.

TOM ASHBROOK: Where are we in this crisis?

JOHN BOGLE: Well, there are two different elements that are involved here. One is where are we in the stock market, which is what everybody seems to be focused on at the moment, and which has taken about a 40-percent header, one of the larger declines of the, uh --

ASHBROOK: history --

BOGLE: — in history. I was actually going to limit it a little bit to say of the ten bear markets that I've been through personally, experienced, during my career. But two of them did get to 50 percent, so we're not at the worst one yet.

And the other is what happens to the economy. And it's the second one that is far more important than the first. Because the stock market is a very speculative machine going on there, and basically you should look at the stock market, I think, as speculators trading with other speculators. I often describe its daily movements as a tale told by an idiot, full of sound and fury, signifying nothing.

ASHBROOK: Except our retirement accounts and all our hopes and dreams, that's all!

BOGLE: But that has very little if anything to do with the daily moves of the stock market. In the long run, the stock market is going to give you the same returns that business earns. A simple truism. And in that sense, with all these jumps in the market, as I said in my previous book, "Little Book of Common Sense Investing," the stock market is a giant distraction to the business of investing.

But to move from the stock market ... to the economy, we're obviously going into some tough times. I said for a long while we're in a recession. That seems to be the consensus now. The measures are kind of peculiar for a formal recession, and not worth paying much attention to, but the bottom of the recession that we're now in could be, I'd say, somewhere between one to two years away.

ASHBROOK: The bottom a year or two away, never mind the recovery?

BOGLE: That's when the recovery would begin.

You can listen to the whole show here.