The ‘Culture of Equities’ Isn’t Dead: Jack Bogle

Tuesday, 21 Aug 2012 | 5:16 PM ET

The culture of equities hasn’t died and it doesn’t really matter anyway, Jack Bogle, Vanguard founder, told CNBC’s “Closing Bell”on Tuesday.


“I don’t think the culture for equities is all that important,” Bogle said. “What we need to understand is that equities don’t create one darn thing. They reflect what business creates.”

Pimco founder Bill Gross recently declared that the “cult of equities” was dead since returns will be lower than they have been in the past. (Read More:Bill Gross: 'Worship' of Stocks Is Dead).

Bogle noted that in 1979, BusinessWeek made the same argument as Gross — just before the start of a major bull market.

Bogle expects that over the next decade stocks will return about 7 percent. They yield about 2 percent and earnings growth should be about 5 percent, he said. The market multiple won’t go up or down much over the decade either, Bogle predicts.

He added that, “If the culture of equities is dead, it’s much more likely to indicate a great buying opportunity more than anything else.”

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But Bogle doesn’t see a great buying opportunity. “I see a normal equity outlook with slightly lower returns, and not many places to hide, especially in the bond market,” he said.

Although there’s tremendous uncertainty in the world, Bogle said, “you can’t stand back, you can’t stay out” of the markets.

“The answer for most investors is intelligent asset allocation between stocks and bonds with a little less emphasis on Treasurys,” Bogle said.

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