Vanguard's Bogle: Fed's Strategy 'Simply Will Not Work'

Thursday, 6 Jun 2013 | 12:43 PM ET
Vanguard's Bogle: Yesterday Sound & Fury Signifying Nothing
Thursday, 6 Jun 2013 | 11:09 AM ET
Jack Bogle, The Vanguard Group's senior chairman and founder, explains why he believes there has to be "spending cuts" and an "increase in taxes" to balance the budget.

Jack Bogle, founder of the Vanguard Group and famed long-term investor, said Thursday on "Squawk on the Street" that over the long run, the Federal Reserve's strategy of loose long-term monetary policy will not accomplish its goals.

"There is a tremendous amount of uncertainty out there," Bogle said. "The uncertainty is somewhat higher because the Fed is in control. They are trying to do something, I think in the long run simply will not work."

"You need both monetary policy and fiscal policy," he said. "At some point our politicians have to stand up to the plate" and make the necessary spending cuts as well as increase taxes.

Bogle said that the best strategy for investors right now is to buy for the long term, and in his opinion the market is "a little expensive" on the fundamental side, but is "nothing that investors should rush out of."

(Related: Economist: Housing Will Thrive After Fed Exit)

"The best wisdom for any retail investor is don't get distracted by all the noise. Stick to your plan. There are no certainties in the world, but it would be amazing to me if over the next 10 years stocks didn't outperform bonds," he said.

Bogle estimates that bonds will have an annual return of 2 percent over this time, while stocks will return 5 percent to 7 percent.

(Related: Progress on the Job Front Will Be Slow, but Steady)

Quoting Shakespeare, Bogle said that short-term moves in the market are "a tale told by an idiot, full of sound and fury, signifying nothing."

Timing the market is not a good idea, he added. "It's totally counterproductive."

_ By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul



Contact Markets


    Get the best of CNBC in your inbox

    › Learn More