LIZ: THIS IS MY OPINION, BUT I'M
REALLY GOING TO SAY IT.
THE MOST HONEST FINANCIAL GIANT
ON WALL STREET HAS DIED.
JOHN BOGLE, FOUNDER OF THE FAMED
VANGUARD GROUP DIED IN BRYN
MAWR, PENNSYLVANIA LAST NIGHT.
HE WAS BORN THE YEAR OF THE
GREAT CRASH AND DEPRESSION,
1929.
I WAS HONORED TO KNOW JOHN FOR
20 YEARS.
HE CARED DEEPLY ABOUT HIS
CUSTOMERS AT VANGUARD.
BOGLE FOUGHT BITTERLY AND OFTEN
AND HARD AGAINST HIGH FEES AND
HE WAS THE KING OF INDEX
INVESTING, WHERE PEOPLE COULD
HAVE EXPOSURE TO THE MARKETS BUT
DIDN'T HAVE TO PAY SO MUCH FOR
IT.
JOHN BOGLE WAS 89 YEARS OLD AND
HE WILL BE MISSED.
JOINING US NOW IN A FOX BUSINESS
EXCLUSIVE, NOBEL PRIZE WINNING
YALE ECONOMICS PROFESSOR ROBERT
SHILLER, ALSO CO-CREATOR OF ONE
OF S&P'S NATIONAL HOME PRICE
INDEX.
I KNOW YOU WERE A COMPATRIOT OF
JACK BOGLE'S.
MUST BE A TOUGH DAY FOR YOU.
>> I ADMIRED HIM.
INTEGRITY IS, HE WAS LIVING
PROOF THAT INTEGRITY IS A LONG
RUN GOOD STRATEGY.
IT GOES WAY BACK TO HIS
UNDERGRADUATE DAYS AT PRINCETON.
HE WROTE AN ESSAY ABOUT MUTUAL
FUNDS AND ARE THEY SERVING THE
PUBLIC.
ALL THROUGH HIS LIFE, HE WAS
WORKING TO MAKE THEM A BETTER
SERVICE TO THE PUBLIC.
ULTIMATELY, IT PAID OFF.
LIZ: HE HAD INTEGRITY, HE WAS
THAT HONEST GUY ON WALL STREET.
I'M GLAD I WASN'T OVERSTATING
IT.
HE WAS JUST ONE OF THE GREATEST.
LET ME TURN AND SHIFT TO WHAT'S
GOING ON RIGHT NOW, AND WE WANT
TO PICK YOUR BRAIN A BIT FIRST
ON THE ECONOMIC EFFECTS OF THE
SHUTDOWN, PARTIAL SHUTDOWN OF
THE GOVERNMENT.
THE TRUMP ADMINISTRATION HAD TO
REJIGGER ITS INITIAL ESTIMATES,
AND NOW IT IS PRETTY MUCH DOUBLE
WHAT THEY HAD THOUGHT WOULD BE
THE ATTACK ON THE GDP.
IT'S NOW GOING TO BE, THEY
SAY, .13% EACH WEEK THAT THE
SHUTDOWN GOES ON.
THAT IS KNOCKED OFF GDP.
IS THAT WHAT YOUR RESEARCH AND
MODELS ARE SHOWING YOU?
I'M INTERESTED TO KNOW, HIGHER,
LOWER?
>> WELL, I WOULD SAY I'D LIKE TO
SUGGEST A LONGER TERM.
THE .13% YOU DESCRIBED IS
SHORT-TERM.
IT'S INCONVENIENT.
I'M A LITTLE BIT ANNOYED.
I'M LEAVING FOR THE WORLD
ECONOMIC FORUM NEXT WEEK.
I DON'T KNOW IF I'LL GET THERE
WITH THE POSSIBLE TSA PROBLEMS.
I PROBABLY WILL.
IT'S AT THAT KIND OF LEVEL OF
ANNOYANCE, THE SHORT RUN IMPACT.
BUT THE LONGER RUN IMPACT IS A
LOSS OF TRUST AND A SENSE OF
POLARIZATION THAT I THINK
INHIBITS REALLY GOOD BUSINESS
DEALING.
THAT'S HARD TO PUT A NUMBER ON.
BUT ULTIMATELY, ONE THING THAT'S
GREAT ABOUT AMERICA IS THAT FOR
CENTURIES, WE HAVE TRUSTED EACH
OTHER AND WE HAVE STAYED WITHIN
THE RULES AND WE PLAY HONESTLY.
THAT ULTIMATELY IS DAMAGED BY
THE KIND OF DISCORD WE SEE AT
THIS PRESENT TIME.
LIZ: SO, YOU KNOW, I DEAL IN
NUMBERS HERE, I'M INTERESTED
BECAUSE IF THIS GOES ON FOR A
QUARTER, SUDDENLY GDP GOES FROM
WHAT PEOPLE HOPED WOULD BE AT
LEAST 2.75% TO 0?
>> I DON'T KNOW.
THAT SOUNDS HIGH TO ME.
BUT IT DEPENDS, WE'LL WATCH AND
SEE.
RIGHT NOW, IT HASN'T AFFECTED
EXCEPT FOR THE GOVERNMENT
EMPLOYEES, IT HASN'T AFFECTED
MOST OF US VERY MUCH.
I REALLY THINK WE HAVE TO THINK
LONG-TERM AND THAT'S ONE THING
BOGLE I THINK, YOU MENTIONED
BEFORE, WAS ADVOCATING.
IN THE LONG RUN, WE HAVE TO STAY
THE COURSE, AND STAY TRUE TO OUR
PRINCIPLES.
LIZ: ALL RIGHT.
LET'S TALK ABOUT THE PRINCIPLES
OF THE HOUSING MARKET.
YOU CALLED THE CURRENT BOOM IN
HOUSING GIGANTIC.
WHAT DO YOU SEE, THOUGH, BECAUSE
THE HOUSING BOOM FOR THIS MODERN
ERA SEEMS TO BE SLOWING JUST A
LITTLE BIT HERE, AS INTEREST
RATES TICK HIGHER.
ARE WE GOING TO SEE SOME TYPE OF
BUBBLE BURST ON A SMALLER SCALE
CERTAINLY FROM THE FINANCIAL
CRISIS, BUT IF SO, WHEN AND WHAT
WOULD TRIGGER IT?
>> I FIGURE JUST LOOKING AT THE
MAGNITUDE OF HOME PRICE
INCREASES, WE ARE GOING THROUGH
THE THIRD LARGEST BOOM IN HOME
PRICES SINCE 1890.
THERE WAS A -- 1942 TO '47 BOOM,
THEN THERE WAS A 1997 TO 2006
BOOM WHICH WERE BOTH BIGGER.
THIS IS A PRETTY BIG BOOM.
I THINK TO ME, IT MAKES THE
OUTLOOK UNCERTAIN.
IF YOU LOOK AT A PLOT, IT LOOKS
VERY REASONABLE TO SUPPOSE THAT
HOME PRICES WOULD FALL, YOU
KNOW, SUBSTANTIALLY IN THE NEXT
FEW YEARS.
I THINK THAT'S A POSSIBILITY.
ON THE OTHER HAND, THESE THINGS
ARE HARD TO FORECAST, AND HOME
PRICES ARE STILL IN REAL
INFLATION-CORRECTED TERMS
OVERALL NOT EVEN BACK TO THE
LEVEL THEY HAD IN 2006.
LIZ: OKAY.
WELL, WE CERTAINLY DON'T WANT TO
SEE THAT KIND OF FROTH, BUT
THANK YOU SO MUCH FOR JOINING
US.
YOU KNOW, ARE YOU WORRIED AT ALL
ABOUT ANYTHING, ANYTHING KEEPING
YOU UP AT NIGHT?
IS IT STUDENT DEBT?
>> STUDENT DEBT IS A SIGNIFICANT
PROBLEM FOR A FRACTION OF THE
POPULATION.
YOU KNOW, IN TERMS OF PREDICTING
THE HOUSING MARKET, IT'S A
FACTOR BUT IT'S NOT A HUGE
FACTOR.
THE TOTAL STUDENT DEBT IS ABOUT
$1.5 TRILLION AT THIS TIME WHICH
IS DWARFED BY THE SIZE OF THE
HOUSING MARKET.
IT DOES AFFECT STARTER HOMES AND