Monday, June 30, 2008

Bill Gross's Open Letter to Barack Obama

In his July Investment Outlook, the manager of the world's largest bond fund offers some advice and predictions to the man he thinks will be the next president: "Dear President Obama".

I don't agree with all the politics there, but that's immaterial. What's of interest, from an investing perspective, is Bill Gross's prediction that an additional $500 billion in government spending will be needed to stimulate the economy; that this will lead to our first $1 trillion deficit, rising inflation, and rising bond yields over the next 4-8 years. "Your term will not go down in history as investor friendly.", Gross writes.

If the views of Jim Rogers and Vitaliy Katsenelson on U.S. stock market over the next several years didn't give you pause, perhaps Bill Gross's predictions will. Those who follow traditional financial planners' suggestions about asset allocation (e.g., keeping a large percentage of one's portfolio in domestic stock and bond index funds) may come to regret it.

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