The New Normal Never Was…

Famed bond-king Bill Gross and his trusty sidekick, Mohamed El-Erian, of Pimco are super smart. And rich. Really rich. Did you know Bill Gross is worth 2.1 Billion? Dollars. US. Dollars. And, did you also know the bond king actually collects stamps? — The more you know.

And, the truth is Billy & Co. would probably be even smarter and richer if they’d just trademarked that catchy phrase they coined, The New Normal.

Think about it: It’s new, yet safe and familiar. That’s what we, in the biz, call marketing gold. Well, gold before it dropped off a cliff…

Now, the way I see it, locking down such an insightful and colloquially colorful phrase like The New Normal would have almost certainly brought Pimco a lot more coin (or stamps)– the TV and t-shirt licensing rights alone; especially in the face of the dwindling margins inside the investment management world.

Think about it: the New Normal explains almost any change from whatever normal was at the moment before. Hot pink this season? The new normal. Gold. Going up? The new normal. Going down? The new normal.

It’s perfection. Perennial. Poetically poignant. A purple polka dot in a field of posies. (ok, that last one was a bit much; I just wanted to keep using P-words.)

And why am I saying all this you may ask… go ahead, ask.

Well, I’ve been tracking Pimco’s New Normal portfolio for some time now. And, while we have all been busy lapping up the idea that the new normal was somehow new, we also seemed to forget that there is absolutely no place where “normal” exists.

Normal is only your myopic impression of a moment in time, a moment that has now just passed you by. There it goes again… And again…

Two seconds ago the old normal was not reading purple polka dots in a field of posies. Then it was the new normal. then it wasn’t. All in about a nano-second. Is your mind blown yet?

Of course change is the only constant, and once we realize this — we can no longer accept such elementary ideas of what normal is, can we? And yet we do.

See, once you think you’ve found normal, new or not, you must also accept that you just missed it by trying to find it. That’s the whole enigma wrapped in a riddle game of life. But it is a catchy slogan, The New Normal. And Bill & Mohamed rode that one hard too.

It’s just too bad it’s a terribly mediocre investment strategy, still.

This is the performance of the allocation Mohamed El-Erian of Pimco suggested you use to emulate their New Normal strategy, compared to the S&P 500.

And this is the same portfolio compared to a boring 60/40 Portfolio. 

So, I guess the New Normal is that the new normal is no better than the old normal.

That’s all for today, class. Next week we tackle going Meta in a Beta world…

Keep Calm and Subscribe. 


9 thoughts on “The New Normal Never Was…

  1. Pingback: Thursday links: doing something valuable - Abnormal Returns | Abnormal Returns

  2. Barry Ritholtz

    I saw Mohamed El-Erian speak when he was doing his new normal tour. During the Q&A, I asked “Isnt this so called “new normal’ just the “Old Normal” — much less new debt or leverage, more savings, less spending — doesnt this look more like the precredit card, pre Greenspan 1950/60s?

    He mostly agreed . . .

  3. Pingback: Weekend reading: Two early jobs that taught me independence

  4. Pingback: cheerful.egg » What I’m Reading This Week

  5. Pingback: 10 Thursday PM Reads | The Big Picture

  6. Pingback: 10 Thursday PM Reads - Euro News Cloud

  7. Pingback: Lecturile diminetii | Dan Popa

  8. BL

    Is the scale correct? because the final values in both is the same (or then I’m not getting this plots …)

Comments are closed.