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> -----Original Message-----
> From: John Cappello [mailto:jvc689@xxxxxxx]
> Sent: Friday, September 06, 2002 10:41 AM
> To: realtraders@xxxxxxxxxxxxxxx
> Subject: [RT] Fortune.com Retirement 2002/Bill Gross
>
>
>
> The forward below is a profile of Bill Gross thoughts. Why would
> anyone expect anything different from this Bond guy?
>
Here's Bill Gross's full commentary on PIMCO:
http://www.pimco.com/ca/bonds_commentary_investment_outlook_0902.htm
concludes:
[...]
If you've got even half of your marbles left, I'll bet you your number is
nowhere near today's level of 8,500. That means that in order to get a real
return sufficiently higher than 3.0% to meet your "risk premium"
requirements the market has to go down before it can go up again. And when
it starts to go up again, it's only going to produce inflation adjusted,
real returns of 5% over the long run if it mimics what the market has
returned over the past 100 years (absent a tripling of P/E ratios). Until
then, stocks are losers and anyone who owns too many of them will be losers
too. As Warren Buffett has said, in the short run the stock market is a
voting machine but in the long run it's a weighing machine. Despite being
down nearly 50% from its highs, this market remains overweight. Forget about
"Stocks for the Long Run" until they slim down to the point from which even
yours truly can admit that they will outperform the bond market. And if some
of this is confusing, just remember this: the market needs to yield close to
3.5% before it approaches fair value, and that means DOW 5,000. While stocks
are the best bet over the very long term, they will not be, nor will they
beat bond returns until they begin the race from a fair valuation. Since in
the short-term the stock market is a voting machine/popularity contest, it's
impossible to say exactly when, if ever, this fair valuation mark of
approximately Dow 5,000 will be reached. If it doesn't get there however,
future real equity returns will be lower than 5%, and a diversified
portfolio of government, mortgage, and corporate bonds will be the best
performing asset class for years to come. And oh, one large caveat. If the
bond market continues to rally and the Fed can successfully engineer a 2%
long-term TIPS rate instead of 3%, then stock markets are actually within
10% of fair valuation. That, however, would continue to support the case for
bonds as the better performing asset class. Sounds like an opening for a
bond geek to write Bonds for the Long Run. Count me out - one book's enough
for me.
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