“Trillion-dollar deficits are here to stay because any recovery is likely to reflect “new normal” GDP growth rates of 1%-2% not 3%+ as we used to have. Staying rich in this future world will require strategies that reflect this altered vision of global economic growth and delivered financial markets.”- Bill Gross [ 1 ]
Bill Gross made a lot of headlines in June of last year when he referred to the markets beginning a new normal. Can we really expect 8% to 10% growth average still? Gross thinks that the “New Normal” is a world in which investors may receive lower returns than normal. Many people have talked about a reversion to the mean, but Gross contends that maybe the historic market return average may be smaller. Slower growth and greater government regulation may restrain corporate profits and put a damper on stock returns. Gross predicts that even high growth companies will start to act more like utilities and seek safety.
“An effective zero percent interest rate, as a price for hiding in a foxhole, is prohibitive.” – Bill Gross [ 2 ]
Investors have started to get tired of earning a 0% return on their cash and money market funds. While almost all money market funds’ share prices are pegged at $1 per share, there is a price to pay for such a guarantee. Guaranteed safety earns next to nothing with respect to a rate of return. A 0% yield or rate of return is no joke. There is almost $4 trillion dollars invested in money market funds that earn close to nothing. If you earned 0.1% on your money, it would take you over 720 years to double your money at that rate! Approximately $20 billion a week has been exiting funds recently in search of higher-yielding investments.
Who Is Bill Gross? Bill Gross is a bond man. In fact, he is often called the “Bond King” because PIMCO, the organization where he is founder and Co-Chief Investment Officer, is the largest bond holders in the world. In investing circles and especially fixed investments, what Gross says carries a lot of weight. Gross is famous for his insight into the current market and where he views it is headed. Unlike previous great financial minds that we have showcased here on Own The Dollar, like T. Rowe Price or Benjamin Graham, Bill Gross is a current mover and shaker in the financial world who can be seen providing his incredible financial acumen in today’s current market situations on CNBC and the like. You should definitely keep your ear out for the things he says.
Do you have your own favorite investing quote or a favorite investor that you would like to see in this series? I would love to hear it. Please drop me a line in the comment section below or e-mail me.
Note – This is a series of posts on Wednesdays with quotes on investing from famous people investors and people in finance. Check out the entire series of Famous Investors’ Quotes.