Bill Gross is in a brooding mood, to put it lightly.
The bond-market king’s latest market commentary, published Monday, starts off with an extended discussion of Bill Gross’ own mortality before segueing into a series of bleak predictions for bond and stock markets in coming years, where he argues money managers will defensively endure many years of negative returns and even be pleased with average returns just 3% higher than the risk-free rate.
Here’s Gross on his own impending demise:
Having turned the corner on my 70th year, like prize winning author Julian Barnes, I have a sense of an ending. Death frightens me and causes what Barnes calls great unrest, but for me it is not death but the dying that does so . . .
What I fear most is the dying . . . the suffering that . . .will accompany most of us along that downward sloping glide path filled with cancer, stroke, and associated surgeries which make life less bearable than it was a day, a month, a decade before.
Heavy stuff for a Monday morning investment outlook, but he relates his own approaching expiry with the end of a 35-year investing supercycle in which full-invested individuals could well have increased their money 20 times over. But Gross, and as he points out, other investing superstars of the past thirty five years like Stanley Druckenmiller, George Soros, Ray Dalio and Jeremy Grantham, see all this coming to an end and soon. Writes Gross:
For the global economy, which continues to lever as opposed to delever, the path to normalcy seems blocked. Structural elements – the New Normal and secular stagnation, which are the result of aging demographics, high debt/GDP, and technological displacement of labor, are phenomena which appear to have stunted real growth over the past five years and will continue to do so. Even the three strongest developed economies – the U.S., Germany, and the U.K. – have experienced real growth of 2% or less since Lehman. If trillions of dollars of monetary lighter fluid have not succeeded there (and in Japan) these past 5 years, why should we expect Draghi, his ECB, and the Eurozone to fare much differently?
These complaints are very much the same as those voiced by some of the biggest names in finance at last week’s Milken Institute Global Conference, where fear of the future overshadowed the few solutions proposed for problems as diverse as the aging of the wealthy world and the effects of global climate change.
There’s a famous essay by the late author David Foster Wallace which might be pertinent in analyzing the reason for Gross and his generation of money managers manifest pessimism. Discussing a novel by John Updike, Wallace lumps the author in with other male writers of his generation, like Norman Mailer and Philip Roth, who increasingly became pessimistic about the future of the novel around the same time that they were increasingly concerned about their own deaths. Writes Wallace, “When a solipsist dies, after all, everything goes with him.”
Though Updike is a novelist, and Gross an investor, the parallels here are striking. The end of Bill Gross is something quite obviously on Bill Gross’ mind, and it’s probably not a coincidence that pondering one’s demise might make one pessimistic about the world that will continue without him.
Make no mistake about it — the global economy faces challenges, from the demographic transformation of the rich world to slowing growth in what may very well be the world’s largest economy, to the perplexing phenomenon of rock-bottom interest rates and disinflation in places like Europe and Japan. But it might serve investors to remind themselves that, in the history of capitalism in the United States, it’s always been a mistake to bet against growth and the wisdom of investing in American capital markets over the long run.