Mohamed El-Erian

VH-1 Presents: Where Are They Now?

…In May of 2009, the world was changed, forever.

The Band? Pimco.

Storming the charts and trouncing Dr. Doom, chart topper for 52 weeks straight, Pimco changed the word “Normal” forever. With Mohamed and his silky smooth songwriting & penchant for punditry, they pushed the envelope of “New” as well.

And in an instant–  “The New Normal” was born.

Tonight we’ll take you back. Following this media sensation. It’s rise to fame… through the flames … to today… On VH-1: Where are they now.

…It was the stuff made of legends…

Mohamed El-Erian tells it,

What sort of returns can I expect from a New Normal portfolio?
A portfolio such as the one I suggest in this article would have generated an 8% to 10% return, on average, each year over the past decade versus a loss of 1.8% for an all-US stock portfolio and a gain of 1.1% for a 60% US stock/40% US bond mix.

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Personally, I like new stuff. Always have, always will. Sometimes new is better. Sometimes not. I’d love to see  Where Are They Now?: the New Coke team. Does anyone remember that fiasco?

…And the classics. Who doesn’t love them? I mean, that’s why they’re called Classics. Coke Classic, right?

The remix is my favorite though. I love the remix. It’s probably the most honest. Not pretending to be original. Embracing the derivative nature of life. The best of both worlds, classic & new.  But I digress….

I dusted off The New Normal portfolio mix. I gave it a spin to see if it would hold up against a classic LP (long portfolio), 60/40.

Disclaimer stuff: First. This was for fun. Just some geeky intellectual curiosity fun. I’m not telling you to invest with any of the securities or allocations in any of these reports. Or purporting market beating returns or anything like that. If you share this– tell the person with whom you are sharing the same thing. Cool? Scouts Honor? Ok. Here goes…

Assumptions: Purchases made 5/1/09 (roughly when the report was released). Reported thru 2/28/11. Rebalanced Quarterly (Benchmark: static). Dividends Not Reinvested /Distributions Reinvested. (Cue up the purists cringing).

Errors: I’m playing with Morningstar Office– I like a lot about it.  Hate some stuff too {another post}. I’ve never tried to re-create the entire history of a fictitious portfolio using it. The report I generated looks about right but don’t slam me if it’s not. Call this the sneak preview cut.

The New Normal Allocation: I re-created the mix from an interview Mohamed gave to Bottom Line Secrets in November 2010 {seemingly scooping absolutely every major business news network in the process– ha}. (HT:nalledge)

Below is the initial mix and securities I used:

  • 15% US Large EQ (Vanguard Total Stock Index)
  • 15% Developed Non-US EQ (Vanguard FTSE All World)
  • 18% Emerging Market EQ (Vanguard MSCI Emerging Market)
  • 03% US Investment Grade Corporates (iShares iBoxx $ Invest Grade Corp Bond) —
  • 03% US Hi-Yield (iShares iBoxx $ High Yield Corporate)
  • 09% Non US Bonds (SPDR Barclays Capital Intl Treasuries)
  • 05% US TIPS (iShares Barclays TIPS Bond)
  • 06% US Real Estate (Vanguard REIT Index)
  • 11% Commodities (PowerShares DB Commodity Index)
  • 05% Infrastructure (iShares S&P Global Infrastructure)
  • 10% Cash

The Benchmark: This is a classic 60/40 mix, without commodities. So that being said, without commodities the last two years for this benchmark is The Song Remains the Same of allocations. Not Zeppelin’s best work, but still classic. If it included Commodities? Whole Lotta Love.

So here it is…

The Moment You’ve All Been Waiting For… 

Ladies and Gentlemen. Boys and Girls.

Put Your Hands Together For….

THE NEW NORMAL. (Click for entire Morningstar Snapshot)

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Source: How to Invest in the “New Normal” — Bottom Line Secrets

Biography: Mohamed A. El-Erian – Wikipedia


Bonus Track:

 

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