* Main commodity indices increasingly track other markets
* Investors seeking diversification look at sub-sectors
* Niche areas more isolated from marco events
* Real assets, OTC energy products, agriculture targeted
By Eric Onstad
By Mark Gongloff
The investigation into the collapse of Iowa brokerage firm Peregrine
Financial Group is notable for one name that has not yet turned up:
JPMorgan, the country's biggest...
By Stephan Benzkofer
After a young novice tried to corner the wheat market, a legendary
financier responded with a mind-boggling move
The recent scandals at MF Global and Peregrine Financial have resonated...
* Louis Dreyfus said to illegally corner cotton mkt in 2011
* Case filed by former senior trader at Glencore
* Dreyfus has no immediate comment
By Josephine Mason and Jonathan Stempel
BILL GROSS: STOCKS ARE A 'DYING' ASSET
By Elizabeth O'Brien
You gotta hand it to Bill Gross. The legendary bond investor has a net worth estimated in the billions, an ocean-side office in Newport Beach, Calif., and a reported devotion to yoga. But despite those seemingly sunny, serene circumstances, Gross maintains one of the more glum outlooks among professional money managers. In his August investment outlook letter, the founder of Pimco projects the death of stocks—or, as he puts it, "the cult of equity is dying." He sees inflation-adjusted returns of around zero for a diversified portfolio of stocks and bonds. What's an investor to do?
For one, take Gross's words with a grain of sea salt, experts say. "These are great headline grabbers, but his crystal ball on equities is no better than anyone else's," says Larry Glazer, managing partner at Mayflower Advisors, a wealth management firm in Boston. In 2002, Gross predicted that the Dow would fall from 8,500 to 5,000, instead of rising as it did to a peak of 14,000 in October of 2007. Gross has a better track record with bonds—his $263 billion Pimco Total Return Fund has outperformed its benchmark and its fund peers for much of the past 10 years—but his early withdrawal from Treasuries cost the fund dearly in 2011.
This time around, Gross challenges the common wisdom that stocks will outperform over decades. In his influential 1994 book, Stocks for the Long Run, University of Pennsylvania professor Jeremy Siegel reviewed decades of historical data andcalled stocks the best investment over periods of 20 years or more, with returns of 6.5 to 7 percent after inflation. But that performance is a "historical freak," Gross says, the result of circumstances—like decades of falling labor costs—that we probably won't see again. Gross say stocks won't likely continue to deliver returns higher than the rate of economic growth, especially in today's shaky climate. Siegel didn't respond to a request for comment, but on CNBC he defended his analysis, saying stock investors could still expect returns that outpace GDP growth.
Gross's bleak outlook follows a strong first half for Pimco, which garnered $21.7 billion in new assets from investors in the six months ending June 30, second only to Vanguard, which attracted $58.3 billion, according to Morningstar. The firm has made a big push into stocks in recent years, anticipating that the long bull market in bonds will wane after some thirty years of falling rates and rising prices.
Some financial advisers are siding with Gross. James Holtzman, an adviser with Legend Financial Advisors in Pittsburgh, has recently been telling clients to expect stock returns of four percent to five percent over the next 10 years, or a paltry one to two points over inflation. To bolster clients' returns, he's been increasing their allocations to alternative investments such as managed futures and gold.
Despite the uncertain outlook here and abroad, others are finding reasons for optimism. John Manley, chief equity strategist for Wells Fargo Advantage Funds, says he takes heart that America remains a hub for talented immigrants from all over the world, and that the country's entrepreneurial spirit remains strong—two catalysts for economic growth that could propel the stock market to big future gains.
"If you don't believe in stocks over the very long term," Manley says, "you don't believe in America."
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