PIMCO co-CEO Bill Gross says we're having "a mini-replay of 2008" in which return of money, not return on money, is becoming the dominant theme.
“Instead of 10 percent returns for stocks, look for five or so,” Gross told CNN Money. “And instead of the past 20 years' returns on bonds, which are actually better than stocks — close to double digits — it's 4 percent going forward.”
That's what the “new normal” is, Gross says, “based upon the primary assumptions of a deleveraging of the private sector and the public sector being limited in what it can spend.”
Gross says that the slight advantage stocks offer “barely” justifies their risk.
As to whether inflation or deflation is the most likely scenario, Gross sees four possible scenarios. “Scenario A is that the global economy rebounds back to past levels of high growth. B is just a decent rebound. C is that new normal — half-sized growth. And D is deflation, debt, destruction,” he observes.
“I'd say we're at a C — right now . . . what we're seeing in Europe puts the minus on that C grade.”
Though he acknowledges that bonds may prove a less worthy investment in the future, Gross says that U.S. debt is still the best to buy.
“Canada and Australia are in decent shape,” he says. “Germany has been okay but is starting to get infected by Europe's troubles. Overall, the U.S. is still the clearest pond in the forest.“
This week, for the first time since the government started collecting the data, central banks, mutual funds and U.S. banks are buying more government securities at Treasury auctions than Wall Street's bond dealers, The Washington Post reports.
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