August 3, 2012

Bogle Joins Gross-Siegel ‘Food Fight’

‘The gloves are off,’ says PIMCO’s bond chief

The smackdown between Bill Gross and Jeremy Siegel continues, this time with Twitter as the venue.

Bill Gross, co-CIO, PIMCO (Photo: AP)“Siegel food fight point is this: BOTH stocks & bonds will return much less than historically. Get used to it. Work hard for the money,” Gross (right), PIMCO’s co-CIO, tweeted Friday morning.

John Bogle, Founder of VanguardIn related news, John Bogle, founder of Vanguard, told Bloomberg in a separate interview he agreed with Gross that investors should expect lower long-term returns than average returns produced over the last century. He said pension funds are unrealistic in targeting 8% returns.

“Pension funds are dreaming about a bubble that isn’t going to return,” he said. “On the other hand, buy-and-hold investing is never dead.”

Friday’s donnybrook was a continuation of Thursday’s controversy. Responding to a comment made by Siegel on Wednesday that he doesn’t know economics, Gross said Thursday that “Professor Siegel is getting a little nasty here. Yesterday I was praiseworthy, but it seems like gloves are off.”

“It sounds like Prof. Siegel hasn't even read my piece, let alone understood it,” Gross continued. “I said as well the cult of bonds is dead. When bonds yield 1.75% for investment-grade bonds, then it's difficult to turn that into a 5%-10% return going forward … If he wants to argue against that, and talk about Dow 5000 and bear and bull markets, then he's welcome to, but he's pushing at windmills in my opinion, and he belongs back in his ivory tower. There, backatcha!” 

Jeremy Siegel of the Wharton SchoolThe piece to which Gross referred was his monthly commentary for August, in which he said the “cult of equities is dying” and compared their long-term returns to a Ponzi scheme, something with which Wharton's Siegel (left) disagreed.

“I love to hear that equities are dead,” Siegel said. “Whenever you hear in the media that equities are dead that’s usually the start of a huge bull market. I looked back 200 years and found returns in the 19th century for equities were the same as the twentieth century. To say the recent bull market run was a freakish period is simply not supported by the data.”

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