Going a step further, Gross, who oversees the management of more than $1.8 trillion of securities, went on to compare the stock market to a Ponzi scheme a few lines later.
“Boomers can’t take risk. Gen X and Y believe in Facebook but not its stock. Gen Z has no money,” Gross also recently tweeted.
Investors Flee Equity Markets
Investors seem to agree with Gross’s grim prognostication. During the first week of August, they pulled $5.7 billion out of U.S. stock mutual funds, doubling the amount yanked out during the prior week. And adding on to the $200 billion that has flowed out of equity mutual funds since January 2011.
The hedge fund superstar Louis Bacon recently returned $2 billion to his investors because he didn’t want to risk losing their money in what he describes as a “constrained” market.
In a letter to his investors, Bacon wrote:
“Unfortunately, as the amount and percentage of the assets I manage have increased these last several years, the markets have been trickier and less liquid. The ‘risk on/risk off’ environment appears to be an abiding presence that has kept my market engagement low.”
If the titans of the industry feel unsure, then how can an individual investor maintain any confidence?
Everything Old is New Again
This isn’t the first time that the death of equity markets has been foretold.
In 1979, BusinessWeek‘s cover story proclaimed the death of the stock market. Three years later, the U.S. economy experienced one of its biggest booms ever, with the Dow tripling its value between 1982 and 1987. So, amongst all the doom and gloom, it is important to keep a historical perspective on the cyclical nature of markets.
“Stock returns have shown great long-term consistency for more than a century in all sorts of economic environments. There are decades when stocks perform badly, but eventually they make up the lost ground.”
Perhaps, in the face of all this uncertainty, it is wise to keep one of Warren Buffett’s classic tenets in mind: “Be fearful when others are greedy, and be greedy when others are fearful.”
Then again, perhaps the titans are right. Perhaps the good old days of the equity markets are wholly in the rearview.
What do you think? Is this the beginning of the end or is it the beginning of a new era? Share your take below.