PIMCO, second worst year since 1987: 10 Key “Bill Gross” Takeaways

For those investing in safe haven assets, 2013 was not the best year. It was terrible not just for gold, but for government bonds as well. So it’s not shock that it was a troubled year for the world’s largest bond fun.

It’s been a difficult year for Pimco’s $244 billion Total Return Bond. It was the worst year since 1994. This was only the second year that has had negative returns, however, since its early beginnings in 1987. While it’s true that the fund declined only by 1.92%, the opportunity cost of investing was high as US stocks were up 30% last year.

Pimco’s founder and manager of the Total Return Fund, Bill Gross, writes a missive that details his projected investment outlook with a well-balanced and objective evaluation. He stuck to a familiar message. The massive money printing of the Federal Reserve will come to an end, which will ultimately have a detrimental effect on the riskier assets like stocks.

While not a popular thesis for the year of 2013, there is every likelihood that the prediction will indeed come true, especially given the 50 year span that he has predicted the decline to happen over. For now, It’s worth noting that Pimco is ramping up current equities offerings.

Here is a key take away quoted directly from Gross’s monthly investment notes from 2013:


“‘Costless’ check writing does indeed have a cost and checks cannot perpetually be written for free.”


“Accept lower future returns in portfolio planning.”


“Pimco cautions ‘rational temperance’: be bullish if you want, but lower return expectations on all asset classes.”


“Investors should be judged on their ability to adapt to different epochs, not cycles. An epoch may be 40-50 years in time, perhaps longer.”


“Give your own portfolio a trim as the year goes on. In doing so, you will give up some higher returns upfront in order to avoid the swift hand of Sweeney Todd.”


“More and more debt cannot cure a debt crisis unless it generates real growth.”


“The bond market ship is not sinking. Expect low but positive returns in future years.”


“Unconstrained strategies, alternative assets and stocks will be flexible choices in a dynamic future environment. We want to continue managing them for you. But don’t give up on bonds.”


“In an unstable global economy that is increasingly difficult to stabilize, an investor should seek out the most stable of assets. At the extreme, that would be cash in the world’s most stable currency.”


“The Fed will have to taper, cease and then desist someday. They can’t just keep adding one trillion dollars to their balance sheet every year without something negative happening”


“Investors in the US and elsewhere must look for investment in the real economy, not share buy-back maneuvers that artificially elevate stock” prices.


“Global economies and their artificially priced markets are increasingly at risk, but the unwinding may occur gradually.”


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