Scott,I visited the Pimco website (I've got some retirement money in the Total Return Fund) and boy are they gloomy about the US economy. They believe the Country is headed for disaster with the high debt level. With news of a possible California default, do you think Pimco's forecasts merit attention?
If Pimco didn't feel that way about the outlook, they would be positioning their fund in a much less defensive way, or recommending that investors look to other alternatives. Whether California defaults is another issue, but personally I doubt that a California default--which has a reasonable chance of occurring--would be the defining event leading to a gloomy U.S. economic growth scenario.
Dow up again today.We now have economic growth, very low inflation and a rising Dow. Property is still soft, but no longer going down, and in some places going up.If Bernanke is wrong, I hope he stays wrong for a long, long time.
"It's hard to worry that inflation is going to rise because there is "too much money chasing too few goods and services."-Indeed, Remember, unique among the world's economies, the USA has open borders. Capital, labor, goods and services pour in here to meet demand.We benefitted from 12 million illegal immigrants (maybe 20 million)coming here to work in the last 15 years or so. Very little wage inflation as a result. Goods pour in, meaning cars, electronics etc. are kept in line. Capital pours in, holding down interest rates and allowing business to expand capacity. Add to the above a soft market in the one thing that cannot be imported--commercial space. Industrial, office, retail all soft.The question is whether Bernanke can create inflation, or can only create growth.I'd say Bernanke is in the happy position of only being able to create growth for a long, long time. If ever the field was wide-open, it is now. The Dow is figuring this out. I have predicted 13k on the Dow before the World Series. Sheesh, it may happen before the All-Star break.
Bill,Also remember Pimco is a bond house. They have amassed a huge amount of money to manage during the bond bull market. If they were to become too optimistic, much of that money might leave for greener pastures. I always expect an outlook on the less sanguine side of the spectrum. I realize this is a rather cynical way to observe them. However I do have great respect for their business. They have done a great job for their clients over the years. There are certainly worse places to have one's investment dollars. And I would always merit their opinions worthy of attention.
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