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James K. Glassman, The American “The cult of equity is dying,” writes Bill Gross, managing director of Pacific Investment Management Company (PIMCO), the hugely successful money management firm. His August Investment Outlook, which is extremely negative on stocks, has been the talk of Wall Street. Some suspect Gross of talking his book, but it’s worse than that. Gross runs the largest mutual fund in the world, PIMCO Total Return, with $270 billion in assets — almost all in bonds — and his antipathy to equities is nothing new. In September 2002, he wrote a piece in his newsletter headlined “Dow 5,000,” that said, “My message is as follows: Stocks stink and will continue to do so until they’re priced appropriately, probably somewhere around Dow 5,000, S&P 650, or Nasdaq God knows where.” His timing could not have been worse. On October 10, 2002, barely a month after the newsletter came out, the Dow Jones Industrial Average hit a low of 7,197 and started back up. The bear market that began in the first quarter of 2000 with the collapse of tech stocks was over. Last Friday, the Dow closed at 13,207. That’s a gain of 85 percent. With dividends, an investment in the 30 Dow blue chips has more than doubled since Gross’s forecast. He was wrong about the other indexes, too. The S&P bottomed the same day as the Dow, never coming close to 650, and is now at 1,406 — up 85 percent. The Nasdaq also reversed course in early October 2002 and has since risen 173 percent. In October 2002, I took issue with Gross’s prediction in a piece titled “Why Stocks Don’t Stink,” citing the history of U.S. equities and the low valuations that were then prevailing. I advised investors not to bail out. I concluded that, not only do stocks not stink, but, “in fact, they’re enticingly fragrant.” Some might say that, as the coauthor of the 1999 book Dow 36,000, I am no better a forecaster than Gross. Fair enough. But there are two differences. First, unlike Gross, I’ve learned my lesson about the forecasting game. Dow 36,000 was a serious financial work, but it suffered from an inflammatory title and a prediction that grabbed attention but had little to do with the mainstream thesis. No more futurology for me. Second, unlike Gross, I am a believer in the long-term rationality and efficiency of markets rather than in conspiracies, name-calling, and hubris. Read More
TARIFF-IED: Trade Talk with Matthew Rooney
This week, trade relations between the U.S. and India are continuing to escalate. Earlier this month, the U.S. stopped granting India special trade privileges by taking away the Generalized System of Preferences (GSP) program, and India has responded by enforcing more tariffs of its own. The George W. Bush-SMU Economic Growth Initiative Director Matthew Rooney breaks down the trade conflict: For more information on trade groups and the global economy, visit www.bushcenter.org/scorecard.
How Trade Spreads Holiday Cheer
It is projected that the average American household will spend more than $1,000 during the holidays this year.
Deporting Salvadorans May Lead to Economic Decline
We should think carefully about a policy whose major impacts are likely to be reductions in employment and economic activity here at home, and increased instability and lawlessness along our borders.
Bush Institute's Laura Collins Talks Immigration on Good Morning Texas
Last week, Deputy Director of Economic Growth at the George. W. Bush Institute Laura Collins spoke with Good Morning Texas about immigration myths. During the interview, Collins had the opportunity to set the record straight and address common misconceptions about legal immigrants living in America today. The segment was inspired from facts released earlier this fall by the Bush Institute in the third edition of America's Advantage: A Handbook on Immigration and Economic Growth. Watch the full Good Morning Texas interview here.