Fund Chief Is Wagering on TIPS; Pimco All Asset's Arnott Feels Stocks Won't Pay Off, Bets on Treasury Security
The Wall Street Journal Online</br></br>For a star-gazer, Robert Arnott has decidedly humdrum advice for investors.</br></br>The amateur astronomer and chairman of First Quadrant LP, a money- management firm in Pasadena, Calif., thinks the glut of economic stimulus from the Federal Reserve's interest-rate cuts and President Bush's tax cuts have given equities a short-term boost. But he worries those moves might also spur inflation.</br></br>So he is forecasting zero return from stocks, after inflation, over the next few years, and betting instead on bonds. Mr. Arnott, who also oversees the $825 million Pimco All Asset Fund, has the majority of the fund's assets stashed in government Treasury Inflation-Protected Securities. TIPS are Treasury bonds whose prices are tied to the consumer-price index, thus offering fixed-income investors a high- quality bond that won't lag behind inflation if the cost of goods and services skyrockets.</br></br>Why does Mr. Arnott see little reason to own stocks, with the average stock mutual fund up nearly 30% since Jan. 1? His answers.