But one reason for small-cap outperformance may be the cheap financing that low interest rates have offered to young companies.

Indeed, the number of bankrupt companies has been dwindling, as low interest rates make it easy for even weak businesses to obtain cheap financing.

By the early 1870's an abundance of cheap financing, rather than business fundamentals, led to a doubling of railroad mileage from the previous decade.

Multinational companies, for instance, could take advantage of cheap financing primarily to pay for investment abroad, he said.

The economic crisis creates a flood of cheap and easy debt-based financing.

These can provide very cheap financing, and often come with business advice or subsidised consultancy.

The State Advances Corporation was set up in 1936 to provide cheap, long-term, urban and rural financing on first mortgages.

While the middle market chugs along, thanks largely to cheap financing, psychology rules against the top end.

"The permanency of their cheap financing is not secure," Mr. Gross said in an interview.

Central banks have lent out a lot of gold to speculators who then sold it short, using the borrowing as cheap financing.