October 24th, 2009


the “New Normal” (Bill Gross/PIMCO)

excerpted from http://www.advisorperspectives.com/newsletters09/Bill_Gross_and_the_New_Normal.php
...the “New Normal” – slow economic growth, high unemployment, and accelerating inflation.

“The New Normal will be an inherent part of our economy for years to come,” he said.

Gross offered specific forecasts – economic growth of 1-2%, unemployment of 7-8%, and inflation kicking in over the next three to five years.

The New Normal replaces the previous paradigm, which Gross described as the “Child of the Bull Market.” Under that paradigm, investors could rely on historically generous rates of return, and whenever returns lagged they would reliably revert to the mean. Barton Biggs, who Gross called the poet laureate of the investment industry, encapsulated this line of thinking when he said that markets were good “because whenever they and the economy have gone down, they’ve gone back up to higher levels.” ...