PIMCO's Investment Outlook

Tyler Durden's picture

"Investment conclusions? A 3% nominal GDP "new normal"means lower profit growth, permanently higher unemployment, capped consumer spending growth rates and an increasing involvement of the government sector, which substantially changes the character of the American capitalistic model. High risk bonds, commercial real estate, and even lower quality municipal bonds may suffer more than cyclical defaults if not government supported. Stock P/Es will rest at lower historical norms [TD: presumably this does not include the 100x + prevailing P/E ratio], and higher stock prices will ultimately depend on tangible earnings growth in the form of increased dividends, not green shoots hope."

In brief, Zero Hedge will translate what is going on in the world:

The 4th branch of the government (PIMCO) is bearish on stocks -> bullish on Treasuries and MBS -> readers are welcome to browse through PIMCO's inventory of over a trillion in rapidly devaluing U.S. printed pieces of paper and buy as many as possible, as Bill Gross needs to buy an archipelago of islands.

The 5th branch of government (and the first 3 as well, Goldman Sachs, of course) is bullish on stocks -> readers are welcome to browse through Goldman's inventory of hundreds of billions in 100+ P/E completely worthless pieces of paper and buy as many as possible, as Lloyd Blankfein needs to frontrun Bill Gross in purchasing said archipelago of islands.

Full letter for those who need bathroom reading can be found here.

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Anonymous's picture

what would zerohedge then recommend we do with our money?

Pizza Delivery Man's picture

You must read the disclaimer. Zerohedge is not an investment advisor. They are financial journalists.

I am assuming you are a grown man/woman and can come to your own conclusions on what to do with your money (as most grown up adults do)

Anonymous's picture

Pizza Man: I am assuming you are a grown man/woman and can come to your own conclusions on what to do with your money (as most grown up adults do)


Do like most 'merican adults: save nothing, and spend everything. Buy american, and spend on beer, prostitutes, and politicians.

Anonymous's picture

No. Keep investing in 401K, mutual funds so that it goes straight to Goldman Sachs Charitable Bonus Fund

Project Mayhem's picture

401k......41k.......4.1k.....   invest for the long term.

Anonymous's picture

With beer and prostitutes you know what you're getting when you buy and there is a definite benefit, this is in stark contrast to the stock market where a machine will take all your money.

Anonymous's picture

Just keep the money in a good bank as fixed deposit. Government owned bank would be better.
OI am in India. so we do that.

Anonymous's picture

Agricultural land.

glenlloyd's picture

agreed, ag land might be a good investment, that is unless farming said land becomes problematic due to escalating energy prices or rising pest / weed control products.

Anonymous's picture

In my fantasy model post shit hitting the fan, I will lease out the land for able farmers (the 25 year olds who might get kicked out of goldman sachs and other wall street firms once the people come to their senses and demand action).

dark pools of soros's picture

watch FLOW and you'll invest in as much water as you can....

Anonymous's picture

It's escalating energy prices--if and when they emerge from some source other than GS-invigorated speculation--that are going to make local ag land valuable. Live on the East Coast? Don't pretend you're going to be getting lettuce and strawberries from the Central Valley if gas hits $10 a gallon--much less $100 a gallon. I'm not a huge subscriber to the hyper-inflation scenario but I'm not willing to completely discount it either. If it starts to emerge, buy land. Gold? LOL. Good luck going to your local Whole Foods with a pocketful of ducats. You'd be dead before you crossed the parking lot.

Anonymous's picture

For me, figure out a cure for cancer, moonlight as mother teresa. what kinda life is treading water?

Anonymous's picture

put your money in a money market account and sit on it for at least 6 months to see who wins the bull vs bear argument. Then invest accordingly.

DebtorShredder's picture

Longer duration bonds are in trouble. Also, stocks are in trouble too because rolling over debt will become harder and harder.

Cash is king, so stay liquid.

Anonymous's picture

Cash is king until the dollar collapses.

DebtorShredder's picture


Ben has two choices:

1) Deflate and lose a few of his banks.

2) Inflate and lose the FED's power.

Which would you choose?

Anonymous's picture

Don’t be blind, it may appear that the value of assets is dropping but when GDP, and wages are dropping faster, it means we can afford less. The dollar is dropping in value, why would you want to invest in it?

johngaltfla's picture

You forgot option #3:


Inflate and have the Obamanation codify new powers insuring permancy as the Fed becomes the actual 4th branch of the Federal Government.


And that option is quite alive.

lookma's picture

Which will Ben B choose?

Remarks by Governor Ben S. Bernanke
Before the Japan Society of Monetary Economics, Tokyo, Japan
May 31, 2003

Some Thoughts on Monetary Policy in Japan



The Bank of Japan became fully independent only in 1998, and it has guarded its independence carefully, as is appropriate. Economically, however, it is important to recognize that the role of an independent central bank is different in inflationary and deflationary environments. In the face of inflation, which is often associated with excessive monetization of government debt, the virtue of an independent central bank is its ability to say "no" to the government. With protracted deflation, however, excessive money creation is unlikely to be the problem, and a more cooperative stance on the part of the central bank may be called for. Under the current circumstances, greater cooperation for a time between the Bank of Japan and the fiscal authorities is in no way inconsistent with the independence of the central bank, any more than cooperation between two independent nations in pursuit of a common objective is inconsistent with the principle of national sovereignty.

I have argued today that a quid pro quo, in which the MOF acts to immunize the BOJ's balance sheet from interest-rate risk and the BOJ increases its purchases of government debt, is a good way to attack the ongoing deflation in Japan. I would like to close by reiterating a point I made earlier--that ending deflation in consumer prices is only part of what needs to be done to put Japan back on the path to full recovery. Banking and structural reform are crucial and need to be carried out as soon and as aggressively as possible. Although the importance of reforms cannot be disputed, however, I do not agree with those who have argued that deflation is only a minor part of the overall problem in Japan. Addressing the deflation problem would bring substantial real and psychological benefits to the Japanese economy, and ending deflation would make solving the other problems that Japan faces only that much easier. For the sake of the world's economy as well as Japan's, I hope that progress will soon be made on all of these fronts.

ghostfaceinvestah's picture

Too bad we are a debtor, not a creditor, nation like Japan.

DebtorShredder's picture

Two points:

-What he prescribed for Japan has little meaning to America. It might as well be night and day.

-He assumed a friendly cooperation between fiscal and monetary authorities. Well, it's hard to achieve that when the fiscal authorities are trying to fire the guy. Now, he's worried about them auditing him and raising the issue about monetary independence. Strays from the script a little, doesn't it?


glenlloyd's picture

if the word "few" equates to "butt loads" in your above scenario I would tend to agree.

Anonymous's picture

And when it collapses, your cash won't be cash.

Anonymous's picture


Cheeky Bastard's picture

and booze ... go long on cigarettes and booze ... the studies have shown that people tend to get self-destructive either in ID or Ego, and that to me spells profit for the companies that produce smokes and booze ... and no i am not kidding ...

Pizza Delivery Man's picture

Invest in yourself. Thats what my momma always told me.

Anyways, I gotta go deliver some pizzas.

For your entertainment---



Cheeky Bastard's picture

ROR dude, i love ahnold parodies ... thanks

dark pools of soros's picture

better yet just open your own liquor store - I've seen scotch skyrocket the last few months

Anonymous's picture

Local liquor store = neighbourhood ATM.
I'd manufacture stockings(regular and fishnet)/ski masks.

Cheeky Bastard's picture

i will print the whole letter and wipe my ass with it after i read it in the bathroom cause i just saw I'm all out of toilet paper and the stores are closed ... thanks TD 

Anonymous's picture

Printer paper won't be cheeky on your cheeks.

Cheeky Bastard's picture

i dont give a shit ( hope you get the joke )

Anonymous's picture

Tyler - It is not "bathroom reading" it is "the library".

And the winner is.....Gross / El Erian and Blankfein / Cohen.

Stocks will suck and Treasuries will suck. Soon enough, we will all be Jim Chanos clones and Chanos will frontrun everybody and get the archipelago of islands.

Anonymous's picture

no, I mean go buy couple boxes cigarettes, a box is 100 cartons.. keep in cool dry place...I survive hyper-inflation, civil war and nato bombing with couple dozen boxes over 10, 11 years, sell pack here, carton there, no problems...in hyper-inflation uncle buy case beer in morning, sell each beer same price evening.. same next day.. no problems..

Cheeky Bastard's picture

i know from first hand how expensive can a box of smokes or a bottle of whiskey be in war times ... some years back, when there was a war in one of the EU countries, the prices of smokes went up 10 000 %, yes you read it correctly ... because there was no distribution line. ... i remember paying 50 bucks for a pack of smokes, 50 bucks man, and i only had one cigarette a day ... 

Anonymous's picture

I wonder if GSEC can custody boxes of smokes for my hedge fund...

Cheeky Bastard's picture

they would trade their mothers and firstborns if they know they could make a profit ...

Miles Kendig's picture

When my unit got sent on line in the sand duty back in August 1990 we stopped over in Germany and hit the stores for the smokes... Won't say if we got booze as well..  Anyway, we were good until the world caught up with us.  And yes we made a bit on the side.  American Marlboro Red is indeed the currency of the war zone.  Bar none.

Steak's picture

I got family in SA, same story.  During the embargo (and for quite a while after) it was Reds and American blue jeans that could get you just about anything.

Anonymous's picture

Geez, at that rate I think I'll tuck a few cartons away for my 2yo nephews college fund - thanks for the tip!
ps - Wanna light?

Project Mayhem's picture

PIMCO the pig is hungry

Project Mayhem's picture

You can have deflation + currency crisis


I like cash (USD) and physical pms.  They hedge each other.

Anonymous's picture

It's called fuckflation. Another entry in the history books that this can happen too along with inflation, deflation, stagflation.

Jee back in the begining of 21st century there was fuckflation.

Anonymous's picture

Im starting to see the light. Cigarettes as a perfect hedge against fuckflation. Pure genius!

Anonymous's picture

Apocalypse Now-

Brilliant Project Mayhem. Not sure if it is saving 100% purchasing power but probably the best decision in the face of dramatic uncertainty regarding credit deflation depression versus currency crisis contagion hyper-inflation (let's stick with those terms so people know what causes them).

A basket of currencies and PM might also work. Note that if you have your money in some type of money market, it's not the same - the government or banks will probably just use those as a slush fund to continue propping up various asset classes or buying "AAA" rated collateralized mortgages- IMO.

The central banks have been cornering the market on gold, and I think wouldn't mind pushing for a new world currency and gold standard since they control most of it, both physical and ETFs (collateralized most likely based on the same original gold & silver duplicated IMO). You can't go wrong on the physical PMs.

But now, let's talk about cash - what kind of form (2 year treasuries?) and what A rated bank do you recommend? Longer term I think a great play will be to short 1X longer term treasuries (like TBT). I don't think anybody on this site would disagree with the math, but then again equities right now are levitating due to a 300 trillion pound gorilla on the other side of the teeter totter?

DebtorShredder's picture

Whoever is controlling these markets seems to have a "Book of Correlations" and is breaking everyone of them for maximum pain. Hedging maybe a problem.

Raymond Shaw's picture

Bravo TD - couldn't have summarised the damned state of affairs any better ! :-)

deadhead's picture

bonds vs stocks as noted in this post reminds me of the joke....

guy goes to psychiatrist and repeatedly keeps telling the psych that he can't decide if he is a wigwam or teepee.... "Doctor, somedays I'm a wigwam, other days I'm a teepee. This is killing me, what's the problem?"


Doctor says "you're two tents"