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Friday, January 09, 2015 4:04 PM

Ding! Ding! Ding! Pimco Plans a Push Into Stocks With 7 New Equity Strategies; No Forecaster Predicts S&P Decline in 2015

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Ding! Ding! Ding! 

Signs of a major market top keep piling on. Pimco provides the latest bell-ringer with launch of 7 new equity strategies.

Please consider Pimco Plans a Push Into Stocks.

Long known as a bond powerhouse, Pacific Investment Management Co. is once again attempting an expansion into stock mutual funds.

The Newport Beach, Calif.-based company, still reeling from the departure of its star manager Bill Gross late last year, said Thursday that it is launching seven new equity strategies in partnership with the asset manager Research Affiliates.

The strategies include investments in large and small companies, as well as international and emerging-market stocks.

The new Pimco strategies will be based on indexes created by Research Affiliates. The firms aim to boost returns and protect from volatility by rating companies based on their size and other economic factors, rather than the price of the security.

“We’re responding to client needs,” Pimco Chief Executive Douglas Hodge said in an interview.
Client Needs?

Pray tell what client needs are those?

Bill Gross, Pimco founder and former CIO (now with Janus), provides a more rational outlook.

Bill Gross says 2015 Is Going to Be Terrible.
Bill Gross, bond king, ousted executive, self-styled poet of the markets, has a bold, depressing prediction for 2015, and he's not couching it in any of his usual metaphor: “The good times are over,” he wrote in his January investment outlook note. By the end of 2015, he goes on, “there will be minus signs in front of returns for many asset classes.”

Gross is putting himself way out on a limb: Not one of Wall Street’s professional forecasters predict the S&P 500 will drop in 2015. Their average estimate calls for an 8.1 percent rise.

Gross has been wrong before, most famously in his predictions that bond yields would rise when the Federal Reserve ended quantitative easing. But maybe this time he sees something other market observers don’t. As Gross writes, deploying the commentary’s only off-color metaphor: “There comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs.”
No Forecaster Predicts a Decline

When not a single forecaster predicts a decline in equity prices in 2015, I like the odds something else will happen in a big way.

As for what Gross sees, I cannot say. However, I can say that I see one of the most overbought, overloved, equity and corporate bond markets in history, with valuations nearly as high as 1929 and the dot-com bubble in 2000.

In fact, this bubble is worse than 2000 because valuations in nearly every equity class are stretched as opposed to just technology.

Mike "Mish" Shedlock

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