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Dr. O
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Deflation, debt destruction, money printing, unserviceable debt and impossible unfunded liabilities. One hell of a mess. Keep some cash around, some hard assets, maybe even some stocks. Live within your means. Don't assume your bank will be open tomorrow. Don't assume there will be food on the... More
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  • Bill Gross Pens Another Masterpiece 0 comments
    Jul 31, 2009 7:06 AM
    From Bill Gross's August 2009 Investment Outlook--

    Investment conclusions? A 3% nominal GDP “new normal” means lower profit growth, permanently higher unemployment, capped consumer spending growth rates and an increasing involvement of the government sector, which substantially changes the character of the American capitalistic model. High risk bonds, commercial real estate, and even lower quality municipal bonds may suffer more than cyclical defaults if not government supported. Stock P/Es will rest at lower historical norms, and higher stock prices will ultimately depend on tangible earnings growth in the form of increased dividends, not green shoots hope. An investor should remember that a journey to 3% nominal GDP means default/haircuts for assets on the upper end of the risk spectrum, as well as extremely low yielding returns for government and government-guaranteed assets at the bottom end. There is no investment potion for this new environment other than steady income-producing bond and equity investments in companies with strong balance sheets and high dividend yields, as well as selectively chosen emerging market commitments where nominal GDP growth prospects are tilted upward as opposed to gravitating to new lower norms. Madame Rue has met her match.
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