Bill Gross: Bull market ending with a 'whimper'
A glum Bill Gross sees both himself and the bull market facing the same long road to oblivion.
In his monthly letter to investors, the bond guru at Janus Capital Markets compared the 6-year-old bull to a 71-year-old man like himself, extending the dark analogy to the fate of the terminally ill protagonist of Mitch Albom's "Tuesdays with Morrie": The future is a "downward sloping glide path filled with cancer, stroke, and associated surgeries which make life less bearable than it was a day, a month, a decade before."
The roaring market will run out of steam "with a whimper, not a bang," Gross predicted. Central bank stimulus isn't having the same effect anymore, and anemic global growth and weak corporate earnings will put a lid on asset price appreciation.
"A rational investor must indeed have a sense of an ending, not another Lehman crash, but a crush of perpetual bull market enthusiasm," he wrote. (Tweet this)
While at bond giant Pimco, Gross had been a proponent of the "new normal" idea that economic growth and market gains both would be muted in the years ahead. The idea, when espoused around the time of the financial crisis, didn't particularly pan out. Stocks rode trillions in Federal Reserve money printing to historic highs and the bond market, despite multiple predictions of its demise, has held in there as investors have continued to seek safe haven plays.
Read More Bill Gross: Why Fed will have problems raising rates
Gross acknowledged his own whiffs in predicting and, moreover, scoffed at his peers for still clinging to the "new normal" notion, which he said depends "on the less than commonsensical notion that a global debt crisis can be cured with more and more debt."
He also talked his own book, recommending investors buy into the idea of an unconstrained fund the likes of which he has been running at Janus since heading there last fall after a much-publicized breakup with Pimco.
At the same time, the fund pitch served as a rejoinder against criticism leveled recently by some of his competitors-in particular Jeff Gundlach at DoubleLine-that unconstrained funds are too opaque.
Read More Gundlach vs. Gross? The 'unconstrained' debate
"Active asset managers as well, conveniently forget that their (my) industry has failed to reduce fees as a percentage of assets which have multiplied by at least a factor of 20 since 1981," Gross added in the letter. "They believe therefore, that they and their industry deserve to be 20 times richer because of their skill or better yet, their introduction of confusing and sometimes destructive quantitative technologies and derivatives that led to Lehman and the Great Recession."
Investors, he said, should start expecting occasional negative annual returns and positive returns that often will run no more than 4 percent or so.
"As it is, in 2015, I merely have a sense of an ending, a secular bull market ending with a whimper, not a bang," he said. "But if so, like death, only the timing is in doubt. Because of this sense, however, I have unrest, increasingly a great unrest. You should as well."
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