PIMCO’s Gross pushes defensive investment strategy

Ready, Set, Hut, Hut, Hut!

PIMCO’s Bill Gross published his “Investment Outlook” for March 2012, comparing the investment world to football, and an offensive versus defensive outlook. “Offensively-minded risk takers in the markets have historically been the ones who have dominated the headlines and won the hearts of that beautiful gal (or handsome guy). Aside from the rare examples of Steve Jobs and Bill Gates; however, the secret to getting rich since the early 1980s has been to borrow someone else’s money, throw some Hail Mary passes and spike the ball in the end zone as if you had some particular genius that deserved monetary rewards 210 times more than a Doctor, Lawyer or an Indian Chief. Nah, I take that back about the Indian Chief. The Chiefs, at least, have done pretty well with casinos these past few decades,” said Gross.

He went on to say, “Low yields, instead of fostering capital gains for investors via the magic of present value discounting and lower credit spreads, begin to reduce household incomes, lower corporate profit margins and wreak havoc on historical business models connected to banking, money market funds and the pension industry. The offensively-oriented investment world that we have grown so used to over the past three decades is being stonewalled by a zero-bound, goal-line stand.”

PIMCO’s investment strategy going forward: “Recognize zero-bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible. A. Emphasize income we believe to be relatively reliable/safe. B. De-emphasize derivative structures that are fully valued and potentially volatile. C. Combine A and B along with security selections to seek consistent alpha with admittedly lower nominal returns than historical industry examples.”

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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