Prepare to Rely on Human Capital Rather than Financial Capital
In his most recent Investment Outlook letter, PIMCO founder Bill Gross suggests that investors need to prepare for difficult adjustments in a world of near zero real returns from financial capital.
Gross describes the dying cult of equity that has evolved over the past century, and advises readers to expect future equity returns that are much less than 6.6 percent average real return (the “Siegel constant”) since 1912.
Gross considers the 6.6 percent real return on stocks since 1912 to be an “historical freak, a mutation likely never to be seen again as far as we mortals are concerned.”
This view is based in part on the notion that stockholders are approaching the end of an historic run during which their 6.6 returns have...
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