Tuesday, September 01, 2009

PIMCO's September 2009 Investment Outlook, "On the 'Course' to a New Normal"

I just finished reading PIMCO's September 2009 Investment Outlook, "On the 'Course' to a New Normal" by Bill Gross. The focus of the latest newsletter remains on PIMCO's model of "a New Normal global economy" driven by "DDR" -- deleveraging, deglobalization, and reregulation -- over the next 10 or maybe even 20 years.

I agree that they have sniffed out the right facts in the near term, but I do not concur that they have necessarily projected the relevant facts accurately far out into the future. Maybe DDR will be the focus in the very short term, but my hunch is that a couple of years from now we will be preoccupied with new issues that we do not even recognize today. And some of the things we agonize about today will evolve into complete non-problems within a few years.

There will be plenty of technological advances over the next five to ten years, few of which are recognized in PIMCO's "model" of the future. I do not know exactly which energy or green technlogies will be more successful over the next ten years, but PIMCO is certainly not inspiring any confidence in their own ability to forecast technology adoption and evolution over a long time horizon.

Sure, economic growth in the U.S. is very likely to be extremely uneven in the next few years, but that is par for the course. I do not see any particularly good reason to believe that average economic activity will be as low as PIMCO forecasts. They see high current unemployment as a drag, but I see it as an available resource.

-- Jack Krupansky


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