Saturday, December 22, 2012
Bill Gross' Tips for 'Beating the Wealth Tax'
Bill Gross, founder and co-chief investment officer of bond giant PIMCO, has devised four ways individuals can beat the "wealth tax" – i.e. higher dividends and capital gains. In an interview with The Daily Ticker he outlines his proposals:
Tip #1: Invest in intermediate securities and roll down the yield curve. This includes buying 5-to-10-year TIPS in the U.S. and U.K. as central bank inflation targets rise. Gross believes negative real interest rates will continue for some time as policymakers around the world try to inflate their economies.
Tip #2: Buy real assets. Gross also recommends holding real assets, such as gold and oil, that keep pace with an inflationary global environment. The recent decline in the price of gold should not affect this thesis, he notes.
Tip #3: Buy stocks that offer steady cash flow and dividends in an unstable economy. Gross says examples of these stocks include Coca-Cola (KO), Procter & Gamble (PG), Johnson & Johnson (JNJ) and Pepsico (PEP). In general investors should buy stocks that have consistent records of growth and can withstand a downturn.
Tip #4: Invest in developing economies with attractive balance sheets. Gross specifically names Brazil and Mexico as the best examples here. It's time for investors to recognize this new era of growth, he says, and these economies are "excellent" buying opportunities.