Bill Gross in a speedo? PASS. PIMCO’s Bill Gross has released his monthly Investment Outlook for October, devoting a few paragraphs to his physique before comparing the today’s debt crisis to his midriff “bulge”, saying “sovereign balance sheets resemble an overweight diabetic on the verge of a heart attack.” He says that if “policymakers could focus on structural as opposed to cyclical financial solutions, New Normal growth as opposed to recession might be possible.” Roadblocks to this which he and his team have identified include:

“1) Globalization has hollowed developed economy labor markets,
2) technology has outdated entire industries that produce physical as opposed to ‘cloud’– oriented goods and services – books, records, postal letters and DVDs among the most recent dinosaurs, and
3) an aging demographic is now favoring savings as opposed to consumption in almost all developed nations.”

Policies to remedy the struggling economy have been focused on capital as opposed to labour and Gross believes that “return(s) on capital investment…are ultimately dependent on returns to labour in the form of jobs and real wage gains.”

He went on to say, “If structural solutions are not put in place, a six-pac market observers should look at both stocks and bonds as rather flabby knock-offs of their former selves; no resemblance at all to Jack LaLanne but more to a 55-year-old terminator grown fat and rendered out of shape by years of neglect and perhaps greed for short-term profits as opposed to long-term balance.

There are no double-digit investment returns anywhere in sight for owners of financial assets. Bonds, stocks and real estate are in fact overvalued because of near zero percent interest rates and a developed world growth rate closer to 0 than the 3-4% historical norms.

There is only a New Normal economy at best and a global recession at worst to look forward to in future years. A modern day, Budweiser-drinking Karl Marx might have put it this way: ‘Labourers of the world, unite – you have only your six-packs to lose.’ He might also have added, ‘Investors/policymakers of the world wake up – you’re killing the proletariat goose that lays your golden eggs.’”

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