PIMCO Chairman Bill Gross launched a bond investor’s jihad two weeks ago with his controversial remarks that the “cult of equities is dying;” now along comes the equity cult’s high priest Burton Malkiel, intoning that predictions of its demise are premature.
Malkiel (left), the Princeton economist best known as the author of A Random Walk Down Wall Street, now in its 12th edition, took to the op-ed pages of the Wall Street Journal on Tuesday, saying investors who would “pull their money out of the stock market today to invest in bonds are making a huge mistake.”
More than just tempering Gross’s anti-equity remarks, the longtime advocate of buying and holding equity-based index funds and ETFs went so far as to say that “equities today are more attractive relative to bonds than at any other time in history.”
Take that, Gross!
What Your Peers Are Reading
The market efficiency proponent cited near-zero rates as a key support for his argument. Since inflation is the foreseeable result of developed nations “saddled with large indebtedness relative to income (i.e., GDP) and large fiscal deficits,” today’s paltry yields are bound to generate negative real return, Malkiel argued.
Gross’s argument about the stock market, which in his characteristic bombast he referred to as a “Ponzi scheme,” took a completely opposite stance.