Bill Gross's investment outlook this month makes case for the last century being an anomaly and future returns of equities being much less than anyone is expecting. I'm wondering what everyone thinks of this. It is available at http://www.pimco.com/EN/insights/pages/ ... ures.aspx#
In case you've never heard of him, Bill Gross is a very highly respected bond manager and has done fairly well at predicting the broad direction of the economy over a long period of time.
The basic premises are:
1. Equities have returned 6.6% over the last century, but there is no economic basis for equity returns to exceed GDP growth over long periods.
2. The only way out of the current debt load is by inflating our way out of it over a couple of decades.
I'm not sure I agree with either point and he doesn't fully support those premises in my opinion. But it is an interesting read.
I found myself thinking that one way to support stocks growing faster than GDP is for there to be a shift in money from some investors losing money on companies going bankrupt. Basically, in the early 1900s some people invested in auto companies that failed while others invested in Ford and GM. The money lost in the failed companies is not counted in the returns. It's an example of survivorship bias and partly results from the losses being shifted to the winners.
What do you think lies ahead?
What will stocks return on average between now and 2112?
Will there be an attempt to inflate our way out of the debt situation in a few years?