Am 1150 Kelowna - Radio Rallies & Reversals
Bill Gross' (of PIMCO) June 2010 Investment Outlook is out, and here's what he has to say:
He starts out by asking why people, companies, and governments borrow in the first place. The answer: to improve standards of living by bringing forward consumption rather than languishing in the present. Such has been the story in the developed world. It's the developing world that is largely debt free, but lacks the standard of living. If we could just find a way to promote more borrowing and spending in the developing world, while the developed world switches back to producing and exporting, many of the worlds problems would be solved.
"Consumption when brought forward must be financed, and that financing is a two-way bargain between borrower and creditor. When debt levels become too high, lenders balk and even lenders of last resort – the sovereigns, the central banks, the supranational agencies – approach limits beyond which private enterprise’s productivity itself is threatened. We have arrived at a New Normal where, despite the introduction of 3 billion new consumers over the past several decades in “Chindia” and beyond, there is a lack of global aggregate demand or perhaps an inability or unwillingness to finance it."
Bill concludes: "Slow growth in the developed world, insufficiently high levels of consumption in the emerging world, and seemingly inexplicable low total returns on investment portfolios – bonds and stocks – lie ahead."
He starts out by asking why people, companies, and governments borrow in the first place. The answer: to improve standards of living by bringing forward consumption rather than languishing in the present. Such has been the story in the developed world. It's the developing world that is largely debt free, but lacks the standard of living. If we could just find a way to promote more borrowing and spending in the developing world, while the developed world switches back to producing and exporting, many of the worlds problems would be solved.
"Consumption when brought forward must be financed, and that financing is a two-way bargain between borrower and creditor. When debt levels become too high, lenders balk and even lenders of last resort – the sovereigns, the central banks, the supranational agencies – approach limits beyond which private enterprise’s productivity itself is threatened. We have arrived at a New Normal where, despite the introduction of 3 billion new consumers over the past several decades in “Chindia” and beyond, there is a lack of global aggregate demand or perhaps an inability or unwillingness to finance it."
Bill concludes: "Slow growth in the developed world, insufficiently high levels of consumption in the emerging world, and seemingly inexplicable low total returns on investment portfolios – bonds and stocks – lie ahead."
posted by Gordon Bell at
11:29 AM
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