Gross: Staying on “Course” to a New Normal

By Prieur du Plessis, on September 6th, 2009 posted in: Investment, Markets, Money

Bill Gross, co-founder and co-CIO of PIMCO, is to my mind one of the shrewdest money men around. His monthly newsletter, this month entitled “On the “Course” to a New Normal”, therefore always makes for thought-provoking reading.

He concludes the newsletter as follows:

“The investment implications of this New Normal evolution cannot easily be modeled econometrically, quantitatively, or statistically. The applicable word in New Normal is, of course, “new.” The successful investor during this transition will be one with common sense and importantly the powers of intuition, observation, and the willingness to accept uncertain outcomes. As of now, Pimco observes that the highest probabilities favor the following strategic conclusions:

1. Global policy rates will remain low for extended periods of time.

2. The extent and duration of quantitative easing, term financing and fiscal stimulation efforts are keys to future investment returns across a multitude of asset categories, both domestically and globally.

3. Investors should continue to anticipate and, if necessary, shake hands with government policies, utilizing leverage and/or guarantees to their benefit.

4. Asia and Asian-connected economies (Australia, Brazil) will dominate future global growth.

5. The dollar is vulnerable on a long-term basis.”

Click here for the full article.

Source: Bill Gross, PIMCO – Investment Outlook, September 2009.

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Frank W

September 7, 2009 at 4:54 am

Thanks for this succinct summary, Prieur, as it means I will not have to plow thru the whole article. Some would take issue with the second point, arguing that government intervention can only cause a bounce in the economy. Private involvement is what makes an economy move in the long term. As to the first point, I note from the wording that Gross is not sure that the Fed will ease too early, putting the economy back into recession. In regard to this possiblity, Mauldin has already called a second (double-dip) recession.

September 8, 2009 at 3:29 am

Please excuse the “misprint”: for “ease”,
please read “tighten”.