As part of the firm’s forecast of a “new normal” in the slow-growth economy, Gross, co-CIO at the largest bond management firm in the world, said returns probably will be half of the normal 8 percent or so annualized profits to which investors have become accustomed.

“We should expect less as opposed to more—new normal as opposed to old normal,” he said in an interview. “We should expect that the private economy is delevering on a global basis. That means consumption and household income growth will be less than it has in prior years.

 “And that means ultimately in terms of risk assets, whether it’s stocks or high-yield bonds or even bonds themselves that those types of returns will reflect a slower rate of growth. In other words, instead of 8 to 10 percent in terms of return for risk assets, you should expect 4 to 6 percent. Reduce your expectations.”

With the 10-year Treasury note yielding just shy of 4 percent, Gross said that number would work as a realistic expectation for growth.

“A company like Pimco hopefully can produce something beyond that because that’s our historical track record and that’s something investors look for us to do.”

But he cautioned that investors “looking to send their children to college or retire on those types of returns, that’s going to be a stretch. You just have to reduce your expectations.”

Jack Bogle, founder of the Vanguard funds group, was less pessimistic about market returns, though he’s troubled by the inability of Congress to come up with reforms to the financial system.

“We ought to be able to get from these earnings levels maybe earnings growth of 6 percent and total returns from stocks a little bit over 8 percent, and I think that’s a reasonable forecast,” he said. “The fundamentals of stock returns ought to be about 8 percent and 4 percent in the bond market. When you compound those numbers of 10 years, that’s almost 100 percent for stocks and 50 percent for bonds. That’s a big difference.”

Experts say: Stock & Bond Returns Will Be Below Normal for Years is a post from Option Selling.
To learn how you too can earn 8-12% Monthly Returns Safely and Conservatively check out OptionGenius.com

I usually respond the same way every time.

“I don’t know.”

If I could predict the market I wouldn’t be here blogging, I would be out enjoying my billions.

Believe me, I have tried to learn how to predict the markets. That’s what technical and fundamental analysis is – an attempt to understand and predict market direction.  In the end, I gave up.

I cannot predict market direction. The pundits on TV and radio can’t do it, all the blogs and gurus online with their fancy explanations, charts, candles, lines, and waves can’t do it with any regularity and neither can the folks on Wall Street.

So why bother?

Why not trade in a way where it doesn’t matter which way the market moves?

Makes sense to me. And that is why I love option selling.  It does not matter what is going on in the market, what news comes out or doesn’t, the premium I sell loses value everyday, and I profit.

Let me give you an example. This month I have a McDonald’s (MCD) trade on. I want MCD to stay within a range. A couple days after I put the trade on, MCD moved higher and almost out of the range. So I adjusted the trade and made the range bigger.

That day a member emailed me with news that there is a rumor going around the MCD is going to raise its dividend. That might be why it went higher. And if the news about the dividend is correct, it might go higher still.

This member wanted me to know that this trade was not a good idea. He was warning me to what could happen. Thanks to this member, who had my best interests at heart, I began to worry about this position.

What if he was right and MCD shot up higher?

But after a while I calmed myself down and realized that it was not in my hands. If MCD went higher I would evaluate the position, adjust if possible or in the worst case scenario take a small loss. But the odds were on my side.

As it turned out, MCD has behaved fine since and the trade is right in the middle of the profit zone. Let’s hope it stays that way.

But my point is that it does not matter if the dollar is stronger or weaker. It does not matter what oil or gold do. The markets still move in ranges and if you play the ranges, 8 times out of 10 you will win. And those wins allow you to make much higher returns that you will in a savings account, a CD, a money market fund, or a mutual fund.

Market Commentary is a post from Option Selling.
To learn how you too can earn 8-12% Monthly Returns Safely and Conservatively check out OptionGenius.com