In the article on MONEYMORNING-14 may 2012
Investors need to accept the fact that we all known that ' games and it seems to be over, ' says Bill gross United States investors. The world's largest Bond Fund, PIMCO, believes that investors in the wake of the financial crisis, the founder of their strategy must be changed.
What other thing is now we look at the history of the financial crisis, taking advantage of the previous understanding of gross says. Since the early stages of the 20th century ' financial leverage has been a trend towards ever upward '. Politicians, regulators and paper currencies frees you from the constraints of the real world, such as the Gold rule sets.
On the other hand, were more willing than the ' private sector, credit the invention of a new type of loosely known as the derivatives game '. Ever-expanding credit attitude, investment for gross says. ' "In the long run for stocks" is almost universally accepted tips [it] for the past half-century, but for most of the "financial assets" for the long term – and your House are included in the category of financial assets in a way even though you just had a pile of sticks and stones. "
Investors take advantage of the extra push on the future value of financial assets would have been used to. ' P/e ratio to rise, 30 year Treasury bond prices doubling, for real estate is thriving because of the global economy and levered anything financial markets were consistently well and levered ' in effect, the Department has ' levered forward in future years, the total number of theft ' and brought.
The new standard
But ' consistently exceeds the ability of the global economy and to replicate them ' growth expectations. Try to add more to the national economy and is now part of the conflict, instead of having to pay off the debt. Worldwide credit still going much slower than before, but up.
Results for ' negative real interest rates and tight credit and equity risk premiums; Will be with us for years to come, promising financial repression ...Of the State '. In this "new normal" as opposed to the ' financial wizardry is a real growing preponderance '. However, the severe or excessive budget deficit achieving more difficult, ' says, and high debt/G D P-level '.
So what does this mean for investors? Grossman's "new standards" and "real" in that the goods will be performing assets star. Financial assets when you try to move quickly back to him to pay. So, courtesy of the high quality, short term bonds and inflation-protected assets for '. and if you want growth stocks long term commitments, rather than look for a taxpayer dividend.
James McKeigue
Contributing writer, MoneyWeek
Investors need to know to change the financial world
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