Monday, October 19, 2009
PIMCO’s Bill Gross: On the "Course" to a New Normal, September 2009 Investment Outlook

According to Mr. Gross’s September newsletter, we are into a New Normal – “a period of time in which economies grow very slowly as opposed to growing like weeds; in which profits are relatively static; in which the government plays a significant role in terms of deficits and re-regulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan, saving to the grave.”

The new normal came about as a result of DD & R – delevering, deglobalization, and reregulation.

As do all trained economists, Mr. Gross does not make pronouncements. He indicates which scenarios have the highest probabilities of occurring. His most recent advice for anyone who will need to invest and /or borrow cash – which includes the 21st century management teams that we are here to support – is:

  1. Governments will keep interest rates low for “extended periods of time”.
  2. Opportunities to earn returns on investments will be as a result of policymakers’ easing and other stimulative measures, both here and abroad.
  3. Accept the fact that government intervention is here to stay. Avail yourself of opportunities to use government debt and/or guarantees.
  4. The economies that will dominate global growth are in Asia or are Asia-centric. Learn Portuguese so that you can do business in Brazil. Learn Australian so you can do business there too.
  5. “The dollar is vulnerable on a long-term basis”.
     

Since Mr. Gross made his fortune predicting which way government interest rates would go, it’s a good bet to pay attention to what he says.