Yesterday my dad and I were discussing Bill Gross, Founder of PIMCO (manager of the largest mutual fund) and the recent press reports that he is calling for a deflationary environment.
While it is true that he sees deflation as one of four possibilities, his interview with CNN Money has not been reported accurately. I suggest you read the article yourself and take note of the following:
PIMCO launched Equity Funds
PIMCO, a Bond manager founded in 1971 who has benefited from the 40 year fall in interest rates and the related out-sized fixed income returns, has launched its first all equity strategy. Stocks have typically done well during periods of inflation, certainly better than bonds, so it seems that PIMCO is positioning its business to benefit from inflation.
The struggle between inflation and deflation will be ongoing and uncertain as our economy de-leverages. PIMCO's action of further diversifying its business is more telling than its investment outlooks and offers a lesson to us all. Right now it is very important to own a well diversified portfolio with assets that will benefit from either inflation or deflation. Below is list of assets that I feel will do well in the corresponding environment.
2) Foreign Investments: (NYSEARCA:EFA)(NYSEARCA:VEU)(NYSEARCA:EEM)(NYSEARCA:VWO)(NYSEARCA:BWX)(NYSEARCA:EMB)
3) Real Assets: (NYSEARCA:GLD)(NYSEARCA:RWR)(NYSEARCA:VNQ)(NYSEARCA:RWX)(NYSEARCA:GRES)(NYSEARCA:CUT)(NYSEARCA:GDX)(NYSEARCA:XME)
4) Treasury Inflation Protected Securities: (NYSEARCA:TIP)
4) Hedging Equities: (using option strategies)
Disclosure: Belray Asset Management is currently long the following positions: SPY, VTI, EFA, VEU, EEM, VWO, GLD, GRES, RWR, VNQ, RWX, CUT, GDX, DTD, DHS, DVY, TIP