PIMCO’s Gross prophesies death of equities in August outlook

NEW YORK, Tue Jul 31, 2012 – Bill Gross, the co-founder and co-chief investment officer of bond giant PIMCO, says it is time to write the obituary for stock investing as we know it.
Writing in his August investment letter, the manager of the world’s largest bond mutual fund said lower returns on stocks – and bonds, for that matter – means individuals will have to work longer to save for their retirements.
“If financial assets no longer work for you at a rate far and above the rate of true wealth creation, then you must work longer for your money,” Gross wrote.
Gross, whose Pacific Investment Management Co has $1.82 trillion in assets, took particular issue with the noted economist Jeremy Siegel, who popularized the notion that a portfolio of stocks can return on average 6.6 percent over the long haul.
“The Siegel constant of 6.6 percent real appreciation, therefore, is an historical freak, a mutation likely never to be seen again as far as we mortals are concerned,” he said.
Gross’ August investment letter is a bit reminiscent of BusinessWeek’s famous “Death of Equities” cover story, which appeared in 1979, just before the start of a big bull market.
Gross, whose firm launched its first actively-managed equity mutual fund in 2010 and has former Troubled Asset Relief Program leader Neel Kashkari as its head of global equities, said bonds are no salvation either.