Bogle: End of ‘Cult of Equities’ Spells Buying Opportunities

Wednesday, 22 Aug 2012 08:20 AM

By Barton Webster

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Pimco founder Bill Gross recently said that the “cult of equities” was dead, as returns would remain low for years to come.

Jack Bogle, founder of the Vanguard Group, believes that the culture of equities hasn’t died, and it’s not that important anyway.

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

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.  

He predicts that during the next decade, stocks will return about 7 percent a year — not bad historically.

Bogle notes that Business Week in 1979 made the same argument as Gross has been making — right before the start of a two-decade-long bull market.

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

However, Bogle isn’t predicting a long-run bull market.

“I see a normal equity outlook with slightly lower returns, and not many places to hide, especially in the bond market,” he says.

But, despite the uncertainty globally, he adds,” you can’t stay out” of the markets.

He explains that most investors should focus on “intelligent asset allocation between stocks and bonds with a little less emphasis on Treasurys.”

Global shares declined from 3.5-month highs on Wednesday, as shares fell in Japan after the country said exports plunged and amid investors’ concern the European Central Bank might not act to heal the eurozone’s debt crisis, Reuters reported.

Shares in London, Paris and Frankfurt were all lower in early trading as Greek Prime Minister Antonis Samaras prepared to meet with the head of the eurozone finance ministers, Jean-Claude Juncker.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

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