StockTouch Blog

The ultimate bull bear debate

August 13, 2012 by Peter


Every week we typically do a Bull Bear recap here on the Stocktouch blog and we think it serves as a great way to look back on the week for investors or just interested readers. In many ways the current economic climate has formed 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. We’ve covered Gross’s opinions here a lot and tried to understand why he sees the markets the way he does as a bond investor. Clearly, as we’ve pointed out he’s talking his book most of the time so it’s safe to say he has a bias towards bonds over stocks. Opposing Gross is 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:

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