Bill Gross: Staying rich in the “new normal”
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June 4th, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
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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 “Staying Rich in the New Normal”, therefore always makes for thought-provoking reading. Click to listen to Bill Gross below:
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He concludes the newsletter as follows:
“The obvious solution to both dollar weakness and higher yields is to move quickly towards a more balanced budget once a sustained recovery is assured, but don’t count on the former or the latter. It is probable that trillion-dollar deficits are here to stay because any recovery is likely to reflect ‘new normal’ GDP growth rates of 1%-2% not 3%+ as we used to have.
“Staying rich in this future world will require strategies that reflect this altered vision of global economic growth and delevered financial markets. Bond investors should therefore confine maturities to the front end of yield curves where continuing low yields and downside price protection are more probable. Holders of dollars should diversify their own baskets before central banks and sovereign wealth funds ultimately do the same.
“All investors should expect considerably lower rates of return than what they grew accustomed to only a few years ago. Staying rich in the ‘new normal’ may … require investors to resemble … Will Rogers, who opined in the early 30s that he wasn’t as much concerned about the return on his money as the return of his money.”
Click here for the full article.
Source: Bill Gross, PIMCO - Investment Outlook, June 2009.
Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scripophily. Read more from the author/contributor here.
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