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Pimco's One Big Idea - Bill Gross


jtvalue
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Big Idea Speed Read

 

1. The New Neutral is PIMCO’s one big idea currently.

 

2. If it is lower than the historical 2% real, and if it facilitates normal asset volatility, then stocks, bonds, and risk assets in general should appear less bubbly than some presume.

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Guest wellmont

their big idea is things are going to be less volatile going forward. right after this idea came out things started to get more volatile.

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"if the New Neutral real FF (federal funds) rate is 0% instead of the Fed’s currently presumed 1¾%, then not only bonds but all financial assets might logically be repriced relative to historical experience.  Even after accepting the historical validity and predictive capability of Robert Shiller’s CAPE (10-year cyclically adjusted P/E ratio), it may be necessary to make adjustments to it, if in fact real policy interest rates over the long term have settled into a lower New Neutral"

 

Profound... his "Big Idea" is basically what is taught in every intro to finance course for decades: Lower discount rates = higher valuations.

 

 

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