In 2013, Gross Recanted Equity Slight; Renewed His Commitment to Bonds

In August 2013, Pimco's Bill Gross declared that Pimco would win the war on bonds. His choice of metaphor said more than he intended, I think, and indicates the state of mind he had been working with for some time.

In the same Reuters article, he was also quoted as admitting that he was wrong about equities. Since I had pointed out his mistake a year earlier in Vorpal Trade, this caught my attention:

Gross, in an interview with cable television network CNBC on Thursday, said investors can still expect returns of 2 to 4 percent from bonds. But he said Pimco "made a mistake" in suggesting that returns from stocks will be limited to between 3 and 5 percent. The S&P 500 has risen more than 19 percent this year. 

By the end of 2013 some small- and mid-cap mutual funds had, in fact, returned more than 38 percent for calendar 2013, and even more since Gross' declaration in August 2012 that investment returns of more than three percent was theft by equity holders. (Actually, he called it "skimming", but the intent of his statement was to say that it was a purloined gain, taken from bond holders.)

Perhaps someone was not changing their mind. The pressure and stress resulting from his recent departure from Pimco indicate that he generally has stuck to the same beliefs he held in August 2012. In the interim, there was a lot of pain for holders of the Pimco Total Return Fund, especially when measured against broader investment benchmarks.