In his Investment Outlook newsletter Bond King Bill Gross says that the cult of stocks is dying and that expected returns from financial assets are going to be very modest: 2% nominal returns for bonds and 4% nominal return for stocks. Mr. Gross also questions how stocks could have returned an inflation-adjusted 6 percent when economic growth has averaged just 3.5 percent.
In an interview with CNBC, Jeremy Siegel shot back saying that there is nothing un-economic about total stock market returns over the long run being greater than GDP growth. He also says that stocks are relatively undervalued today.
The matter did not end there. Prof. Siegel and Mr. Gross battled it out on Bloomberg TV. Prof. Siegel said Mr. Gross has “the economics wrong”. Mr. Gross responded by saying the good professor’s theory “lacks common sense”.
Wanting to milk this storm in a teacup for all it is worth, Bloomberg TV brought in John Bogle to weigh in on the debate. Mr. Bogle thought that stock returns can be expected to be lower than historical levels but thought that Mr. Gross’s estimate is a bit on the low side. As you may expect from someone who founded Vanguard, Bogle says buying and holding a portfolio of stocks and bonds is not dead at all.
In an interview with the IndexUniverse website, Burton Malkiel says that Treasury bonds are likely to be very bad investments because the debt problems in the developed economies are going to be solved on the backs of the bondholders.
Jason Zweig reports in The Wall Street Journal that retail investors are getting “disgusted” with the stock market in the wake of yet another “flash crash” in many blue chip stocks on Wednesday.
In his column in The Globe and Mail, John Heinzl listed the seven common investor mistakes and offered tips to avoid them.
Preet Banerjee argues that providing updates on how the financial markets performed every day is pointless both for long-term investors and those who make frequent trades.
Canadian Money Forum members weighed in on news that the parent of ING Direct Canada is looking to sell the online bank.
Now for something completely different. The Globe and Mail put together a very nice graphic showing the history of Canadian in the summer Olympic games since 1900. You can sort the medals by year, colour, sport and gender.