Bond guru Bill Gross writes about money market mutual funds and cash in his latest Investment Outlook in a piece entitled "Anything but .01%". He introduces the piece by quoting Will Rogers' famous line, "I'm not so much concerned about the return ON my money as the return OF my money."

Gross says, "With the global financial system apparently stabilized, returns 'on' your money are back in vogue, and conservative investors who perhaps appropriately donned a Will Rogers mask nary a fortmonth ago are suddenly waking up to the opportunity cost of 0% cash versus appreciated assets at renewed double-digit annual rates. That 0% yield is not a joke. Almost all money market accounts -- totaling over $4 trillion dollars, shown in Chart 1 [his chart includes small CDs too] -- yield close to nothing, so close to nothing that I mistakenly did a double take when reviewing my monthly portfolio statement."

The piece continues, "Well now, I say to myself, this is very interesting from a number of different angles. If I was hoping to double my money, it would take approximately 6,932 years to get there at that rate!" He says, "Yet, as Will Rogers knew, and Lehman Brothers demonstrated to another generation, the pain of the foxhole can immediately transition to the dodging of real bullets on the investment battlefield. Moving out on the risk asset spectrum has worked wonders since March of this year, but it comes with the risk of principal loss -- failing to receive the return of your money."

Gross adds, "OK, so where does that leave you, the individual investor, the small saver who is paying the price of the .01%? Damned if you do, damned if you don't. Do you buy the investment grade bond market with its average yield of 3.75% (less than 3% after upfront fees and annual expenses at most run-of-the-mill bond funds)? Do you buy high yield bonds at 8% and assume the risk of default bullets whizzing at you? Or 2% yielding stocks that have already appreciated 65% from the recent bottom, which according to some estimates are now well above their long-term PE average on a cyclically adjusted basis? ... [A]s emphasized in prior Investment Outlooks, the New Normal is likely to be a significantly lower-returning world."

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