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PIMCO's Gross prophesies death of equities in August outlook
I don't think Gross is saying the end of equities, simply that expectations should not be what they once were, and even moreso for bonds. Additionally, that a large portion of the population has soured on what he calls the "cult of equities" and that that may continue. You have an older generation that does not want to take the same risks and a younger generation that is not going to take the baton fully - "“Boomers can’t take risk. Gen X and Y believe in Facebook but not its stock. Gen Z has no money." (from Gross's letter) Pensions expecting real returns of 7-8% minimum should think again, etc.
As Gross has said recently, the letter ends expecting inflation as the end result.
"The problem with all of that of course is that inflation doesn’t create real wealth and it doesn’t fairly distribute its pain and benefits to labor/government/or corporate interests. Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades. Financial repression, QEs of all sorts and sizes, and even negative nominal interest rates now experienced in Switzerland and five other Euroland countries may dominate the timescape. The cult of equity may be dying, but the cult of inflation may only have just begun."
Additionally, at the core, a fair amount of what Gross is saying feels quite similar to what Rob Arnott is saying, although Arnott is more to the point.
I'll also note separately that Coach is down nearly 20% on the day, and Starbucks got creamed the other day - there's been a few other noteworthy momentum plays going in reverse and whatever one believes about the long-term status of equities, short-term caution would certainly appear to be warranted.
The somewhat funny thing about this is that Gross wasn't saying that equities are done for, but that a lot of the expectations around equities may be - at least for a long time. Yet, the media of course jumps upon this to try and spin it as a positive for equities - "Other people have said stocks are over before and look!" Gross is simply saying tone down your expectations and that what is thought to be a "given" regarding aspects of investing may not be for a long time again. Additionally, Gross isn't promoting bonds either, and I agree with him on an inflationary outcome.
Reply to @johnN: John, Dessauer's investment outlook is better placed in a completely new thread. This one is about what Gross wrote. It does not make justice for people that would be interested in what Dessauer says because it is in a thread about Gross and kind of hidden.
Reply to @scott: I agree with your interpretation of Gross's message. Returns from both equities and bonds will be lowered than the average of the past. Investors need to adjust their expected return downward in the near future.
Reply to @Sven: Food prices are going to be a real issue over the short-term and long-term, but there's unfortunately not that many real pure-play ways to take advantage of that. Adecoagro (AGRO) is a South American farmland play partly owned by George Soros and a few other significant hedge funds, but its way down from the IPO and there continues to be concern regarding their Argentina assets. Sprott Resource Corp (SCPZF) does have a very large amount of farmland leased in Canada and has - last I looked, it may have changed - some private investment in South American farmland. However, it also has a ton of other public/private investments in varied commodities. That is down from where it was, but has been around the same price since late last Winter. Given the private equity nature of a lot of the Sprott company though, it is potentially very volatile. I don't currently own either.
You can buy a Nestle or other such company, but it becomes a matter of how well the costs can be passed off. They've been pulling the 8 oz package becomes 7.5 oz package becomes etc etc, but that can only be done to a point.
You can buy commodities ETFs specifically dealing with ag, but the problem is that many of these funds generate a K-1 at tax time - and they aren't tactical - it's really a matter of getting in/getting out (and then dealing with the k-1 next year - not that that dealing with a k-1 is horrible, but for something that would be more of a trading vehicle than a long-term investment like an MLP, it's really kind of annoying.) DBA, the ag ETF, for example, does generate a K-1.
I own the new AQR Risk-Balanced Commodity fund, which is actively managed and does have some ability to short.
Comments
As Gross has said recently, the letter ends expecting inflation as the end result.
"The problem with all of that of course is that inflation doesn’t create real wealth and it doesn’t fairly distribute its pain and benefits to labor/government/or corporate interests. Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades. Financial repression, QEs of all sorts and sizes, and even negative nominal interest rates now experienced in Switzerland and five other Euroland countries may dominate the timescape. The cult of equity may be dying, but the cult of inflation may only have just begun."
Additionally, at the core, a fair amount of what Gross is saying feels quite similar to what Rob Arnott is saying, although Arnott is more to the point.
I'll also note separately that Coach is down nearly 20% on the day, and Starbucks got creamed the other day - there's been a few other noteworthy momentum plays going in reverse and whatever one believes about the long-term status of equities, short-term caution would certainly appear to be warranted.
http://finance.yahoo.com/blogs/daily-ticker/dear-pimco-bill-gross-maybe-analysis-stocks-140155518.html;_ylt=AihcWGORv2qIbh9LeNfffxCiuYdG;_ylu=X3oDMTQzZWZrbGM4BG1pdANGaW5hbmNlIEZQIEp1bWJvdHJvbiBMaXRlBHBrZwNkMGE2YWE1My02ZGY1LTNiZDEtYmU5YS1jMDlhNmM4ZGJmMWMEcG9zAzEEc2VjA2p1bWJvdHJvbgR2ZXIDMmFkMjQyNjAtZGJlMi0xMWUxLWJlNzktZDkxMDU0ZTlhMmIx;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3
http://www.johndessauerinvestments.com/uploads/August_2012.pdf
personally I think if you are near retirement or have < 5 yrs to go, maybe best to have 70% bonds/30% stocks portfolio to be more safe than sorry...
Inflation is probably here already with rising food price due to drought. You eluded to this in your earlier post.
http://www.marketwatch.com/story/buy-farms-and-food-grantham-2012-07-31
You can buy a Nestle or other such company, but it becomes a matter of how well the costs can be passed off. They've been pulling the 8 oz package becomes 7.5 oz package becomes etc etc, but that can only be done to a point.
You can buy commodities ETFs specifically dealing with ag, but the problem is that many of these funds generate a K-1 at tax time - and they aren't tactical - it's really a matter of getting in/getting out (and then dealing with the k-1 next year - not that that dealing with a k-1 is horrible, but for something that would be more of a trading vehicle than a long-term investment like an MLP, it's really kind of annoying.) DBA, the ag ETF, for example, does generate a K-1.
I own the new AQR Risk-Balanced Commodity fund, which is actively managed and does have some ability to short.