In many ways this is the ultimate bull versus bear debate. On one side you have Bill Gross, the legendary bond investor who founded PIMCO and has amassed a fortune during one of the greatest bull runs in the history of bonds. Clearly, he’s talking his book most of the time so it’s safe to say he has a bias towards bonds over stocks. And in the other corner you have one of history’s all-time great buy and hold advocates, Jeremy Siegel of Wharton. Both men were on CNBC to discuss their long-term outlook for the equity markets.
Gross recently stated that the cult of equity was dying and that the 6.6% rate of return we’ve seen since the 1920’s was likely too high going forward. He made some controversial statements comparing GDP growth to the market’s total return in which I believe he erroneously neglected to subtract consumption of dividends. Regardless, his bearish equity stance was made plenty clear in his investment letter released recently. Seigel corrected his error saying there were many things wrong with Gross’s statements and goes on to supply historical evidence.
Gross makes his case that expectations going forward need to be muted. On Bloomberg Gross even said “he’s obviously pushing at windmills in my opinion and he belongs back in his Ivory Tower.” Here’s full back and forth:
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.