Bill Gross has published his July 2009 Investment Outlook. Here are my notes:
1. Umpire John McSherry died during a game because he couldn’t stop eating.
2. Franz Kafka wrote a story in which a man starves himself almost to the point of extinction because he “couldn’t find the food” he liked.
3. The two individuals mentioned above tells us humans need to change the way they think and act or we will all end up like John McSherry and the hunger artist.
4. US and many global consumers consumed too much in the past based on credit that does not exit. This cannot be sustained. In the future, a “new normal” will set in.
5. The New Normal is a state where growth is slower, profit margins are narrower, and asset returns are smaller than in decades past based upon the delevering and reregulating of the global economy, which in turn should substantially inhibit the “gorging” of goods and services that we grew used to in decades past.
6. Econometric models miss these secular/structural breaks in historical patterns because it is impossible to quantify human behavior. Human beings do not make decisions by chance or independently of each other, but in many cases in reaction to one another
7. The supersizing of financial leverage and consumer spending in concert with the politicizing of deregulation describes our most recent brush with irrational behavior and inefficient markets.
8. Greed will come again. But for now, the trend is the other way and it promises to persist for a generation at a minimum.
9. American lost at least $15 trillion wealth.
10. The only model one can use to forecast the future is a commonsensical one that predicts higher savings, lower consumption, and an economic growth rate that staggers forward at a new normal closer to 2% as opposed to 3½%.
11. High unemployment does not support a quick return of old normal
12. Profit will settle at perhaps half of absolute peak profit level of 2007 and grow slower.
13. Tax will be higher because of the national healthcare system.
14. The new normal will not be investor-friendly.
15. Short-term policy rates will be kept low for longer than cyclical norms and the outlook for risk assets – stocks, high yield bonds, and commercial and residential real estate will involve just that – risk.
16. Investors should stress secure income offered by bonds and stable dividend-paying equities. Over-consumption is a relic of the past.
Click to read the original article
1. Umpire John McSherry died during a game because he couldn’t stop eating.
2. Franz Kafka wrote a story in which a man starves himself almost to the point of extinction because he “couldn’t find the food” he liked.
3. The two individuals mentioned above tells us humans need to change the way they think and act or we will all end up like John McSherry and the hunger artist.
4. US and many global consumers consumed too much in the past based on credit that does not exit. This cannot be sustained. In the future, a “new normal” will set in.
5. The New Normal is a state where growth is slower, profit margins are narrower, and asset returns are smaller than in decades past based upon the delevering and reregulating of the global economy, which in turn should substantially inhibit the “gorging” of goods and services that we grew used to in decades past.
6. Econometric models miss these secular/structural breaks in historical patterns because it is impossible to quantify human behavior. Human beings do not make decisions by chance or independently of each other, but in many cases in reaction to one another
7. The supersizing of financial leverage and consumer spending in concert with the politicizing of deregulation describes our most recent brush with irrational behavior and inefficient markets.
8. Greed will come again. But for now, the trend is the other way and it promises to persist for a generation at a minimum.
9. American lost at least $15 trillion wealth.
10. The only model one can use to forecast the future is a commonsensical one that predicts higher savings, lower consumption, and an economic growth rate that staggers forward at a new normal closer to 2% as opposed to 3½%.
11. High unemployment does not support a quick return of old normal
12. Profit will settle at perhaps half of absolute peak profit level of 2007 and grow slower.
13. Tax will be higher because of the national healthcare system.
14. The new normal will not be investor-friendly.
15. Short-term policy rates will be kept low for longer than cyclical norms and the outlook for risk assets – stocks, high yield bonds, and commercial and residential real estate will involve just that – risk.
16. Investors should stress secure income offered by bonds and stable dividend-paying equities. Over-consumption is a relic of the past.
Click to read the original article
