Bill Gross of PIMCO : BUY Gold

The Federal Reserve: The Biggest Scam In History

Sept. 17

Gold (GC : NASDAQ : US$1,774.50)

The cult of bonds is dead. The cult of equity is dying. Buy real assets…gold…a house?

 

PIMCO boss Bill Gross said in his September Investment Outlook,:

The age of credit expansion, which led to double-digit portfolio returns is over. The age of inflation is upon us, which typically provides a headwind, not a tailwind, to securities price – both stocks and bonds.” On Friday, Gross tweeted, “#Fed to buy mortgages ‘til the cows come home. Think 7% unemployment, 2.5% inflation targets.

Buy real assets…gold…a house!” In an interview with Bloomberg TV on September 5, Gross said, “Gold can’t be reproduced. It can certainly be taken out of the ground at an increasing rate, but there’s a limited amount of gold and there has been an unlimited amount of paper money over the past 20 years to 30 years and now…central banks are at their leisure in terms of basically printing money…You know, I am not a gold bug. I am just suggesting that gold is a real asset and will be advantaged if the Federal Reserve or the ECB central banks start to write checks in the trillions. So what my objective is, I am not sure. I just think it [gold] will be higher than it is today and certainly a better investment than a bond or stock, which will probably return only 3% to 4% over the next 5 to 10 years.”

 

 

Stock Investing As We Know It Will Soon Be Dead: PIMCO’s Bill Gross

English: Mohamed A. El-Erian, Managing Directo...

English: Mohamed A. El-Erian, Managing Director of the Pacific Investment Management Company, speaking at the World Economic Forum Summit on the Global Agenda 2008 in Dubai, United Arab Emirates. (Photo credit: Wikipedia)

Gross, the co-founder and co-chief investment officer of bond giant PIMCO, says it is time to write the obituary for stock investing as we know it.

Writing in his August investment letter, the manager of the world’s largest bond mutual fund said lower returns on stocks — and bonds, for that matter — means individuals will have to work longer to save for their retirements.

If financial assets no longer work for you at a rate far and above the rate of true wealth creation, then you must work longer for your money

“If financial assets no longer work for you at a rate far and above the rate of true wealth creation, then you must work longer for your money,” Gross wrote.

Gross, whose Pacific Investment Management Co has US$1.82-trillion in assets, took particular issue with the noted economist Jeremy Siegel, who popularized the notion that a portfolio of stocks can return on average 6.6% over the long haul.

“The Siegel constant of 6.6% real appreciation, therefore, is an historical freak, a mutation likely never to be seen again as far as we mortals are concerned,” he said.

Gross’ August investment letter is a bit reminiscent of BusinessWeek’s famous “Death of Equities” cover story, which appeared in 1979, just before the start of a big bull market.

Gross, whose firm launched its first actively-managed equity mutual fund in 2010 and has former Troubled Asset Relief Program leader Neel Kashkari as its head of global equities, said bonds are no salvation either.

In his April investment letter, Gross struck a similar tone on total return expectations. Gross then said investors should get used to smaller investment returns because of slower global growth and as the financial services industry continues to deleverage, or reduce its reliance on derivatives and borrowed money to generate higher returns.

This time around, Gross said at their currently low interest rates, investors should expect “mere survival” from their bond investments.“With long Treasuries currently yielding 2.55%, it is even more of a stretch to assume that long-term bonds – and the bond market – will replicate the performance of decades past,” he wrote.

In his August letter, Gross says the only “magic potion” monetary policymakers have to try and get higher returns for investors is through inflationary policies.

He said inflationary policies might work for bonds, but that they are bad for stocks. And over the long term, Gross said using inflation to solve retirement ills is not a real solution.

“Unfair though it may be, an investor should continue to expect an attempted inflationary solution in all almost all developed economies over the next few years and even decades,” Gross wrote. “The cult of equity may be dying, but the cult of inflation may have only just begun.”

“The problem with all of that of course is that inflation doesn’t create real wealth and it doesn’t fairly distribute its pain and benefits,” he continued.

Gross in June kept the proportion of U.S. government and Treasury debt in his US$263.4-billion Total Return Fund unchanged at 35% of assets, according to a report July 11 on the company’s website. Mortgages were at 52% for a second consecutive month. Pimco doesn’t comment directly on monthly changes in its portfolio holdings.

In developed nations, Gross has advised investors to favor debt of the U.K., as well as the U.S., as Germany faces risks related to the eventual costs required to end the region’s worsening sovereign and banking crisis.

The U.S. Treasury market is considered the cleanest “dirty shirts” for investors, Gross wrote in his previous commentary. “Don’t underweight Uncle Sam in a debt crisis. Money seeking a safe haven will find it in America’s deep and liquid, almost Aaa rated, bond and equity markets.”

Pimco’s Total Return Fund gained 7.3% during the past year, beating 73% of its peers, according to data compiled by Bloomberg.

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Ask yourself the hard questions – what are my expectations/ results and what must I do to change if the results aren’t what you want.

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PIMCO -Gross Gives His Strategy For Zero Bond Yields

Treasure Valuation Committee

Treasure Valuation Committee (Photo credit: portableantiquities)

PIMCO’s Bill Gross published his “Investment Outlook” for March 2012, comparing the investment world to football, and an offensive versus defensive outlook.

“Offensively-minded risk takers in the markets have historically been the ones who have dominated the headlines and won the hearts of that beautiful gal (or handsome guy).

Aside from the rare examples of Steve Jobs and Bill Gates; however, the secret to getting rich since the early 1980s has been to borrow
someone else’s money, throw some Hail Mary passes and spike the ball in the end zone as if you had some particular genius that
deserved monetary rewards 210 times more than a Doctor…

He went on to say, “Low yields, instead of fostering capital gains for investors via the magic of present value discounting and lower credit spreads, begin to reduce household incomes, lower corporate profit margins and wreak havoc on historical business models connected to
banking, money market funds and the pension industry.

The offensively-oriented investment world that we have grown so used
to over the past three decades is being stonewalled by a zero-bound, goal-line stand.”

PIMCO’s investment strategy going forward:

Recognize zero-bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible.

A. Emphasize income we believe to be relatively reliable/safe.

B. De-emphasize derivative structures that are fully valued and potentially volatile.

C. Combine A and B along with security selection to seek consistent alpha with admittedly lower nominal returns than historical industry examples.”

P.S. Please feel free to forward this along to friends, family, co-workers, or anyone else you think might be interested in this market letter ( http://www.amp2012.com)

 

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Bill Gross of PIMCO – Tells Us The Future

Economic growth for the 2001 to 2005 business ...

Image via Wikipedia

PIMCO head Bill Gross released his February Investment Outlook titled “Life – and Death Proposition”, discussing the potential fall out from a de-levering economy and the impact of near zero interest rates.

Highlights from the report include:

1) Gross believes “the transition from a
levering, asset-inflating secular economy to a post-bubble de-levering era may be as difficult for one to imagine as our departure
into the hereafter;”

2) He stated, “Zero-bound interest rates do not always and necessarily force investors to take more risk by purchasing stocks or real estate;”

3) As rates approach zero, “money can become less liquid and frozen by price”, limiting any potential appreciation on fixed income securities as rates cannot go lower, convincing investors to hold cash as opposed to
extending credit, a requirement for economic growth; and

4) In Gross’ conclusion, he says, “Where does credit go when it dies?
It goes back to where it came from. It delevers, it slows and inhibits economic growth and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this thing up as we go along for what may seem like an eternity…

His conclusion “We are witnessing the death f abundance and the borning of austerity, for what may be a long, long time.”

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