UlTImATE SUccESS GUIdETwo of the money giants of our time, John Bogle and Bill Gross of
Pimco tell us that we had better deal with it and adjust to it until the next
major trend comes our way. Until then, they are both saying “Welcome
to the New Normal.”
John Bogle is the founder of mutual fund giant Vanguard and is gen-
erally regarded as one of the most sober and intelligent stock market
analysts of all time. Bill Gross is the vaunted manager of the $2 trillion
family of mutual funds, Pimco.
Both are already famous enough and neither needs more money to live
their lifestyle. When they make controversial statements, it may pay to
listen. If they are sounding a warning, it may pay to listen.
Back in 2002, Mr. Bogle first used the term “new normal” to describe a
new prolonged period of very tame returns equal in length to the twenty
year bull market of 1980 to 2000. Mr. Gross made the term “new nor-
mal” famous in an article in 2010.
His premise? Half size economic growth can only logically lead to half
size stock market returns over the long run. After an exploding econom-
ic period where budgets in government were finally balanced, we’ve
moved to an imploding economic infrastructure getting crowded out by
government debt.
How logical is it to expect 10% returns in an environment like we’re
in—especially when politicians in Washington are treating it like busi-
ness as usual.
For the new generation of retired and retiring men and women, the new
normal couldn’t come at a worse time. Ironically, today’s retiring baby
boomers created the “old normal” when they were younger.
Think about it. Seventy eight million aging investors getting more con-
servative means less money going into stocks and less money spent at
the malls. Less money going into mutual funds and markets means less
demand, and lower returns. Logically and mathematically, we won’t see
a new prolonged bull market until the economy becomes authentically
sound again. This isn’t a pessimistic view, it is realistic.
Let’s not forget another aspect of this “New Normal”: as the govern-
ment spirals deeper into debt, taxes will also rise which could further