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The Cult of Equities is Dying

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Bill Gross, the "Bond King" from Pimco, just confessed: "the cult of equities is dying".

Within 24 hours of release, the article at this link caused quite a stir on Wall Street. 

He basically said that holding equities for the long term is now unrealistic for investors and...

"The legitimate question that market analysts, government forecasters and pension consultants should answer is how that (historical) 6.6% real return can possibly be duplicated in the future given today’s initial conditions..."

That's an amazing confession from someone who is so prominent in the "retirement" industry.

So you think that "the Bond King" would recommend bonds right? 

Not so, he says bonds will likely fare even worse than stocks.

"With long Treasuries currently yielding 2.55%, it is even more of a stretch to assume that long-term bonds – and the bond market – will replicate the performance of decades past."

So what does he recommend investors do? 

Work. That is the only thing he tells investors that they can expect to do. 

"The commonsensical conclusion is clear: If financial assets no longer work for you at a rate far and above the rate of true wealth creation, then you must work longer for your money, suffer a haircut on your existing holdings and entitlements, or both."  

That's one heck of a statement form an investment firm!!!  

In my view he is basically telling his customers "We can't help you, there's really no place left for us to put your money."

Also, check out chart on salaries as it relates to GDP over time in the article – very interesting!

Original publish date: August 15, 2012

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