Bond king Bill Gross recently wrote an investment letter criticizing the investment principles of Wharton professor Jeremy Siegel in an investment letter.
Then Siegel appeared on CNBC to defend himself, and explain how Bill Gross' analysis was completely wrong.
Siegel, who appeared on Bloomberg TV earlier today, pointed out that back in 2002 Gross had called for the DOW to fall to 5,000 over the next 10 years but that it was at about 13,000.
Bill Gross followed on Bloomberg TV to fire back at Siegel:
"Well Professor Siegel is getting a little nasty here but it seems like the gloves are off.
When I said the cult of equity is dying what I meant was that those investors and those liability structures such as pension funds and insurance companies that have depended on a 6.5 percent constant real return from stocks such as we've had over the past century are bound to be disappointed.
In individual terms those that are looking for double digit returns for stocks to pay education to pay for retirement are bound to be disappointed. And that's why the cult of equity is dead and I mentioned as well, and it sounds like Professor Siegel hasn't even read my piece let alone understood it. But I said as well the cult of bonds is dead…
So what we've really seen in the past several years in terms of the appreciation of markets and the decline of interest rates based on what the Fed has been doing is a result which has eliminated the possibility of investors in bonds and stocks to earn an adequate return relative to their expected liabilities. If he wants to argue against that and talk about DOW 5,000 and bear and bull markets, you know he's welcome to it. But he's obviously pushing at windmills in my opinion and he belongs back in his Ivory Tower."
Siegel had also said that Gross had misunderstood when he looked at the 100-year time frame for the 6.6 percent return, and wondered how with GDP growth at 3 percent, stocks can give 6.6 percent.
To that Gross said:
"Well Professor Siegel's Ivory Tower again lacks common sense. If wealth is created at 3 percent a year in terms of GDP and that wealth is divided as it always is by government, by labor, and by business in the form of corporate profits, then its hard to see how one element of corporation and stocks can continue to 3 percent more than real GDP going forward, and that's common sense."
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