New Normal is For Chimps
Ken Fisher has fighting words for Pimco.
BY Caroline Cakebread | September 28, 2010
Below, a story posted today on Reuters shows that not everyone agrees with Pimco’s “new normal”:
(Reuters) The next decade will be as good for investors as the 1990s, said Ken Fisher, the billionaire chief executive officer of Fisher Investments Inc., dismissing notions that developed economies face below-average growth.
Fisher said the concept of a “new normal” is “idiotic,” pitting him against money managers including Mohamed El-Erian, the CEO of Pacific Investment Management Co., which coined the term to describe a world of high unemployment, more regulation, and the shrinking importance of the U.S. in the global economy.
“We are chimpanzees with no memory,” Fisher said at the Forbes Global CEO Conference in Sydney. “The next 10 years are going to be just as good as the 1990s. The problems in this current environment we think are so different, and so new and so unique. It’s the same stupid old normal we’ve always had. We’ve got a great future.”
Any revaluation of China’s currency against the dollar is unlikely to have a long-term effect on investors, said Fisher, who oversees $35 billion from Woodside, California.
The U.S. is seeking a stronger yuan after its trade deficit with China widened to $145 billion in the first seven months of this year, from $123 billion for the same period in 2009.
Skepticism and pessimism are normal sentiments for investors 18 months after the bottom of a bear market, according to Fisher, who said in July 2007 that the global credit crunch was “just all minor volatility” and “just fears of much ado about nothing.”
The Standard & Poor’s 500 Index climbed for eight of the 10 years, from 1990 to 1999, including five consecutive annual gains of at least 19.5 percent in the second half of the decade. In London, the FTSE 100 Index also rose for eight of the 10 years.
Pimco, based in Newport Beach, California, used the phrase “new normal” last year, forecasting an extended period of lower-than-average economic growth. Bond and equity strategists, bankers and economists adopted the term as concerns grew about Europe’s debt crisis and the strength of the global recovery.
“We can quibble about details, but right now, we’ve got the world snarky, skeptical, pessimistic, which is normal a year and a half after the bottom of a big bear market,” said Fisher. “It’s what we always get.”
Fisher said in October 2008 that U.S. stocks were close to the bottom. The S&P 500 fell about 30 percent from October 2008 to a 12-year low in March 2009.
Fisher said he disagreed with billionaire investor Wilbur Ross, chairman of New York-based WL Ross & Co., who said at the conference today that the U.S. economy will be “sort of bumbling along, not having a lot of direction one way or the other.”
An upward revaluation of China’s yuan against the dollar wouldn’t create any new jobs in the U.S., said Ross.
“Those jobs are gone,” he said. “‘The only question is, do they stay in China or do they migrate to Indonesia, Malaysia, Thailand or Vietnam? It’s total political nonsense, all the China bashing.”
Forcing China to raise the value of its currency may create 500,000 U.S. jobs, according to C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington.