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Stocks Still Better Than Bonds: Vanguard’s Bogle

Monday, 8 Oct 2012 | 12:41 PM ET

There’s up to a 90 percent chance that stocks will post greater returns than bonds over the next 10 years, Vanguard Group co-founder John “Jack” Bogle told CNBC on Monday.

John C. Bogle, founder of the Vanguard Group Inc.
John C. Bogle, founder of the Vanguard Group Inc.

“I think the odds that stocks will give a higher return than bonds over the next decade are probably 85 to 90 percent,” he said on “Fast Money.”

“The fundamentals are that bonds are yielding maybe 2 ½, 3 percent if you throw in some corporates, and stocks are yielding 2.2 percent in the S&P ,” he added. “Yet the S&P stocks are going to have earnings growth. There’s nothing extra the government can do or the bond issuer can do other than pay the agreed-upon coupon.”

Real upside could be greater, Bogle added.

Stocks to Grow 5% Next Decade: Vanguard's Bogle
There's a 90 percent chance that stocks will post greater returns than bonds over the next 10 years, Vanguard Group co-founder John 'Jack' Bogle says.

“Stocks have earnings growth, which I suspect will be something like 5 percent over the next decade — 5 percent a year, some years way ahead of that, some years down, some years behind that,” he said. “So that should be a 7 percent real return, fundamental return on stocks, not counting any change in the market’s valuations, (price-to-earnings) multiples and so on.”

Bogle also took issue with the assumption that pension funds can post returns of 8 percent, saying that it would require performance “that would be off the charts from anything that is known in history on the assumption that all of these private equity fund manager will be above average.”

He added: “I can tell you, they’re not all above average.”

—by Bruno J. Navarro, CNBC.com Producer.

Trader disclosure: On Oct. 8, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by the “Fast Money” traders: Simon Baker is long AAPL; Simon Baker is long JPM; Simon Baker is long WFC; Simon Baker is long GOOG; Simon Baker is long UNH; Simon Baker is long NFLX; Stephen Weiss is long T; Stephen Weiss is long VZ; Stephen Weiss is long VOD; Stephen Weiss is long QCOM; Stephen Weiss is long BAC; Stephen Weiss is long CLNY; Stephen Weiss is long MTGE; Stephen Weiss is short AAPL PUTS; Joe Terranova is long VRTS; Joe Terranova is long WFM; Joe Terranova is long SWN; Joe Terranova is long TRV; Joe Terranova is long VZ; Joe Terranova is long VLO; Joe Terranova is long CSTR; Joe Terranova is long CHKP; Joe Terranova is long GLW; Joe Terranova is long EMC; Joe Terranova is long NXPI;

For Steve Milunovich
1. This company/entity is, or within the past 12 months has been, a client of UBS Securities, and investment banking services are being, or have been, provided: HPQ

2. This company/entity is, or within the past 12 months has been, a client of UBS Securities, and non-investment banking securities-related services are being, or have been, provided: HPQ

3. This company/entity is, or within the past 12 months has been, a client of UBS Securities, and non-securities services are being, or have been, provided: HPQ

4. Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: HPQ.

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