(Article from Bloomberg By Nick Baker)
Sept. 19 (Bloomberg) -- John Bogle, who created the $106 billion Vanguard 500 Index Fund in 1976, said the U.S. government is ``punch drunk'' with proposals to rescue the financial system.
``We're playing a game of casino capitalism, interfering with the way the market is working,'' Bogle, 79, said in a telephone interview today from Valley Forge, Pennsylvania. ``The government seems punch drunk. It doesn't seem systematic.''
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed removing troubled assets from banks' balance sheets last night, while the Securities and Exchange Commission temporarily banned short sales of financial firms. The plans followed the government takeover this week of American International Group Inc., the biggest U.S. insurer, and its bailout of Fannie Mae and Freddie Mac, the largest mortgage financiers, two weeks ago.
The Standard & Poor's 500 Index rallied as much as 4.5 percent after yesterday's 4.3 percent rebound from the lowest level since 2005. The gains helped send the MSCI World Index of shares in 23 developed nations to the steepest two-day surge since June 1970.
``I'm obviously in the minority,'' Bogle said.
The U.S. stock market has gained or lost more than $500 billion on four of the past five days, according to data compiled by Bloomberg.
`Most Speculative I've Seen'
``Believe me, the value of American business doesn't change that much in a day,'' said Bogle, named one of the industry's four ``Giants of the 20th Century'' by Fortune magazine in 1999.
Bogle, who retired from Vanguard Group Inc. in 1999, said he hasn't changed his personal asset-allocation target -- 35 percent in stocks and 65 percent in bonds -- since 2000. Because of price fluctuations, he currently has about 30 percent in stocks and 70 percent in bonds.
The S&P 500 jumped 6.7 percent from the low to its high yesterday, the biggest intraday swing since July 2002, according to Bloomberg data.
``We're in the most speculative market I've seen,'' said Bogle, who was born five months before the stock-market crash of 1929. ``We seem to be in the depths of despair one moment, and the heights of optimism the next.''
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