Aug. 6 (Bloomberg) — When Bill Gross started Pimco's most recenteffort to expand into stocks three years ago, he vowed not torepeat the mistake he made in the 1980s, when his bond tradersoverwhelmed a handful of equity managers at strategy meetings,eventually prompting them to quit.

Last week, the manager of the world's largest bond fund atPacific Investment Management Co. in Newport Beach, California,compared long-term returns from equities to a “Ponzi scheme” andsaid returns of 6.6 percent above inflation, known as the SiegelConstant, won't be seen again. “The cult of equity is dead,” Gross,68, said in an Aug. 2 interview with Betty Liu on BloombergTelevision.

“I can imagine the equity managers cringed the same waycorporate-credit managers cringed when he said earlier in thedecade he wouldn't buy a corporate bond at any price,” said BillPowers, who worked at Pimco from 1991 until 2010 and was a memberof its investment and executive committees. “Bill will always speakhis mind about value in the markets.”