Christine Benz: How about foreign equities? Given starting valuations, especially in emerging markets, do you see that they might have some return premium versus U.S. equities?
Jack Bogle: Well, that's what the marketplace is telling us. Foreign equities and, particularly, emerging markets are deemed to be cheap. They're selling at lower P/Es--that's clear. The dividend yield isn't a lot higher, but it's probably a little bit higher. But I just think the outlook is so uncertain, given this upheaval in the world economy. If they are importers, they've got a problem; if they are exporters, they've got a problem. Look at poor Australian with China not buying all those natural resources from them anymore--or buying them in tiny amounts.
So, I don't do international. And emerging markets is a little separate part of so-called "international." We're wonderful in America--we call non-U.S. funds international. Where's the U.S.? (Laughs.) They are really non-U.S. funds--non-U.S. portfolios. I probably talked about this a year ago. I say, "What are you buying?" There is such a thing as oversimplifying--this coming, of course, from the great simplifier. People say, "Buy the EAFE Index or the FTSE International Index." So, [I tell people to drill down into that index]. What are you buying? Look behind the curtain. Your largest investment is Britain. Your second-largest investment is Japan. Your third-largest investment is France.
What, Christine, I ask you, is the possibility that those three nations are going to outpace the U.S. in terms of investment return in the next 10 years? I just don't think it's possible. And those countries may be the better ones. Each one has its own set of troubles. We've got plenty of troubles over here in the U.S. But at least we know that we have the most innovative economy, the most productive economy, the most technologically advanced economy, the most diverse economy in the world. And we also have shareholder protections that can be taken for granted. Outside of the U.S., you can be very disappointed. I think it was in Malaysia a few years ago--you couldn't get your money out. Korea is a bit fragile in that regard. Heaven knows what China would do under those circumstances. But if you don't have the basic institutional structure for the markets and the basic protection of shareholder rights that we've had institutionalized over 250 years here, you want to be very careful before you depart that.