Prepare to Rely on Human Capital Rather than Financial Capital

In his most recent Investment Outlook letter, PIMCO founder Bill Gross suggests that investors need to prepare for difficult adjustments in a world of near zero real returns from financial capital

Gross describes the dying cult of equity that has evolved over the past century, and advises readers to expect future equity returns that are much less than 6.6 percent average real return (the “Siegel constant”) since 1912. 

Gross considers the 6.6 percent real return on stocks since 1912 to be an “historical freak, a mutation likely never to be seen again as far as we mortals are concerned.” 

This view is based in part on...

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Short-Term Focus has Adverse Impact on Retirement Income Product Development

Warren Buffett’s most recent shareholder letter focuses on the merits of productive assets such as equities in light of the current low interest rate environment and the potential for future inflation.

Buffett’s view is that although productive assets are variable and volatile, they are more likely to preserve future purchasing power than the fixed or currency-based alternatives.

Buffett’s advice would seem to provide a key...

Lack of Yield Results in Variable Annuity Product Revamp at MetLife

Metlife posted record variable annuity sales of $8.6 billion during the most recent quarter. The VA sales record represents an 86 percent increase from the same period a year ago. MetLife also announced that it will be lowering the returns offered on future variable annuity offerings in an effort to “re-price and improve the risk profile” of their product offerings. Record low interest rates have made it difficult to sustain the richer product features contained in the current...
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Sun Life Financial Warns on Third Quarter Earnings

The following is a summary of stories related to the recent earnings warning from Canadian financial services company Sun Life. <a href="http://storify.com/tcochrane/sun-life-financial" mce_href="http://storify.com/tcochrane/sun-life-financial" target="_blank">View "Sun Life Financial Warns on Third Quarter Earnings" on Storify</a>