Tags: Pimco | Gross | Stocks | Worship

Pimco’s Gross: Stocks Will Survive, but 'Worship' of Them Is Dead

Friday, 17 August 2012 07:50 AM

Stocks will always hold a place in a typical investment portfolio, albeit a smaller one, said Bill Gross, founder of Pimco, manager of the world's largest bond fund.

Investors, however, should abandon the 50-year old notion that double-digit returns from stocks are a given.

“Equities have reached a dead-end in terms of significant appreciation,” Gross told CNBC. “Equities are still alive, but the cult of equities is dying.”

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

Investors should be on the lookout for other asset classes such as land or other hard assets.

Gross wouldn't comment on the effects a Mitt Romney presidential victory or an Barack Obama re-election would have on markets, but did say a new U.S. president could prompt a changing of the guard at the Federal Reserve in 2014, which would likely ring in an end to the loose policies embraced by Fed Chairman Ben Bernanke.

“Ultimately that’s good for bondholders, but in the short run that means higher interest rates,” Gross said.

Gross grabbed headlines recently when he wrote that "the cult of equity is dying" in a letter to investors.

"Like a once bright green aspen turning to subtle shades of yellow then red in the Colorado fall, investors’ impressions of 'stocks for the long run,' or any run, have mellowed as well."

Some noted investors disagree, pointing out that overly bearish calls on equities in the past were wrong.

“It’s always a question of balance but anyone who is out of stocks right now is making a big mistake," said John C. Bogle, founder of The Vanguard Group, told CNBC.

Other noted bears have advised investors to look for opportunities when everyone else is running for the door.

The European debt crisis, for example, has sent stocks falling too far, especially in healthy countries.

Even if the eurozone does break up, opportunities will arise from some companies to fill gaps left vacant by others in countries exiting the currency zone should it come to that.

“For the first time in my life, I’ve started to buy some European stocks, and I will buy more over time,” said Marc Faber, the publisher of the Gloom Boom & Doom report, according to Bloomberg. “Equities have become inexpensive.”

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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Friday, 17 August 2012 07:50 AM
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