Bill Gross: Investment Outlook (June 2017)

Bill Gross: Investment Outlook (June 2017)


by William H. Gross, Janus Henderson Investors

A recent Internet blog posed the predicament of many medium/long-term relationships: At some point couples run out of historical stories or even topical things to say. After all, there are only so many Trump tweets you can talk about, and you've long since agreed to disagree about the meaning of life. The blog suggested inventing some new philosophical brainteasers to keep the conversation alive. Having written Investment Outlooks for over 30 years now, I thought it apropos to follow the same approach, so here are my twisters and summary comments following each. Spoiler alert: please think of your answer before reading the "comments".

  1. If forced to choose between killing your favorite pet or an anonymous human being, what would you do?
    Comment: In a USA TODAY survey from a decade ago, the majority of responses seemed to favor killing the person and saving the pet!
  2.  Would you rather be "interested" or "interesting"?
    Comment: Most say "interested", (as would I), but it's a close vote.
  3. If you were offered one year of quality life in addition to how long you would have lived anyway, would you give up your cellphone for it?
    Comment: This one creates the most controversy. Young people do not give up their phones. Older people jump at the chance for that additional year. They don't know how to use a cellphone anyway!
  4. If you were stranded on an island with a totally repugnant looking and abusive human being, would you entertain romance with him (her)?
    Personal Comment: Maybe at 22, not 72!
  5. If offered the certainty of a second life after your current one, but it would be a life of misery with no moments of happiness, would you take it?
    Comment: A few actually say yes, suggesting that their misery might in some way lead to happiness for others.
  6. Is there an emotional distinction between saying "Luv you" and "I love you"?
    Comment: Almost certainly. Inserting the "I" signifies a much stronger – and riskier – personal commitment.

Investment Brainteaser:

Can the Trump Agenda recreate 3% growth?
Well, now, that is the investment question of the hour/day/decade and its conclusion, unlike romance on a desert island, will determine the level of asset prices across the investment spectrum. 3% growth leads to a levered rate of corporate revenue/profit increases and a significantly higher P/E ratio, all else equal. 3% growth also sends a green light/all clear signal to high yield bonds and other risk assets that are leveraged and growth dependent. It may also, although not necessarily, lead to higher real interest rates and a future bond bear market. So what's the answer?

Northwestern's Robert Gordon has long argued that lower productivity may now be a function of having picked all of the "low hanging fruit" such as electrification and other gains from 20th century technology.

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