John Bogle, founder of The Vanguard Group, tells PBS’ Darren Gersh that he expects corporate earnings will come back stronger than the 5 percent average growth they’ve exhibited over the past century as they revert toward their mean.

Bogle didn’t say exactly when he expects the earnings rebound to begin. But he does say he thinks that, given the poor stock returns of the past decade, we’ll move toward “more normal returns in the stock market now”. One reason: Dividend yields are high, and over the years dividends have proven to play a major factor in long-term stock returns. (In fact, Bogle says the market’s long-term 9.5 percent historical return is composed of a 4.5 percent dividend yield and 5 percent earnings growth). “We had a 1 percent dividend yield back in 2000,” Bogle said. “Now that yield is up to 3 percent. So the fundamentals are stronger than they have been in a long time.”

In addition, Bogle says not to confuse the stock market and the economy. He says the recession could go on for another year-and-a-half or two years. But because the market is forward-looking, the question is how much of that future economic trouble is already discounted into stock prices.

Bogle also weighs in on the Bernard Madoff scandal, saying that “people should be mad as heck and not going to take it anymore”. His advice: “Beware of marketers. … And make sure are you investing rather than speculating. Know exactly what your costs are. It is a big part of the equation, and make sure you are tremendously diversified in stocks and bonds and have an intelligent asset allocation.”