Ordinarily, I have tremendous respect for the folks at PIMCO, one of the best run money management firms on the planet and home of Bill Gross, a legend in the field. I do wonder about the news story out today in which the media says that one of the head investors maintains stocks are overvalued, the economy will stay at an anemic 2% per year for several years, and unemployment will remain elevated at 8% for some time to come.
My questions: Why does it matter? As a new investor, none of those things should have any influence on your savings, especially if you are more than ten years away from retirement. If you look back at the careers of some of the biggest legends on Wall Street - people such as Warren Buffett or Walter Schloss, many of their best investments came from the 1970's when interest rates were approaching the double-digits, stagflation was hurting most families, oil shortages made basic necessities such as gasoline difficult and expense to obtain, and stocks were trading at rock-bottom price-to-earnings ratios.
Thinking Like a Business Owner
If you own a small retail store, are you going to stop buying inventory you know will be successful just because employment might be at 8% two years from now? If you have the opportunity to buy a profitable storage unit business in your hometown, are you going to pass for the same reason? Of course not. Why should you do the same when presented with opportunities in stocks you understand and believe will be successful in the long-run. Sure, there is a good chance that shares could drop 10% over some arbitrary time period. There is also a chance that you will never have the opportunity to buy stock at that price in the future. There are several investors who have given interviews because they waited to buy Berkshire Hathaway Class A shares, now over $100,000 each, when they were $250 because they wanted to wait until they fell back to $200, which never happened. Saying you know what a particular stock is going to do is like saying you have the power to predict the future or read minds. It isn't going to happen. Any success you have is pure luck.