Bill Gross of Pimco may be the most widely-admired fixed income investor in the world. He is also a first rate pessimist in a pessimistic time.
His most recent monthly letter says that the “new normal”, a ridiculous term used to create a sense that the future can be foretold, will be a world in which no one except perhaps the lucky, will make much money on investments at all.
“Investors will likely not know whether the mouse has grabbed for the cheese for several years forward. In the meantime, they are faced with 2.5% yielding bonds and stocks staring straight into new normal real growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the long run at 12% returns. And the most likely consequence of stimulative government policies that strain to get us there will be a declining dollar and a lower standard of living.”
Based on his analysis the upcoming years will be hell for those with IRAs, those with pensions, and even those who will count on Social Security. Public and private pensions funds and endowments at universities and hospitals will not return anything like what they have for the last two decades. Those who want better medical care may find that the local hospital has been shuttered.
A number of analysts already expect the funds for Social Security payments to be on the road to depletion by the end of this decade. The President’s blue chip deficit reduction panel is likely to point that out in its report due in December.
If Gross is right, and his argument is compelling, the prospects of golden years have evaporated.
Douglas A. McIntyre