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El-Erian and Gross put much of their sizable personal philanthropic efforts into education, donating tens of millions of dollars to scholarships and financial aid in the U.S. and abroad. And there will likely be more big donations to come, since even in the new normal, PIMCO normally figures out how to make money. "On the first Friday of every month, I'm completely conflicted," says El-Erian. "The investor side of me is really looking forward to the employment report because we have had a better call on it and linked it much better to what it means for our clients' money. But the citizen side of me looks at what's happening to workforce participation and unemployment. Is it still at a record high? What's the percentage of youth unemployed?"
Still, he places his bets. The stock market as a whole may be a Ponzi scheme, but according to El-Erian and Gross, blue chips have become the new bonds. Multinational franchise firms (think Coca-Cola, Procter & Gamble and IBM) can spread risk around the world while delivering a 3% inflation-beating dividend. Well-capitalized, growing firms that are undervalued because they are in beleaguered markets (Spain's Santander Bank, which is expanding rapidly in Latin America, is a good example) are also smart plays.
While political risk in the U.S. makes Gross shy away from long-dated bonds, he's keener on the higher-yielding debt of countries like Mexico and Brazil (which El-Erian praises for grappling with issues of inequality). PIMCO is still hot on housing and anything housing-related, like timber stocks and construction firms.
After all, the Fed's last round of quantitative easing was focused on mortgage-backed securities, and PIMCO has a chunk of them in its portfolio. Of course, it also has a big chunk of assets in cash, which is only logical for the prophets of the new normal. That's not a state of affairs that Gross--who recently joked that the yield on one of his money-market accounts over the past year wouldn't even have bought his wife a new pair of shoes--likes much. So he and El-Erian continue to plot and plan and invest in the new normal, watching the horizon for the crest of that money wave, hoping to keep riding it for a while longer before it finally crashes to shore.
The original version of this story said that Mohamed El-Erian was educated at Harvard. He was actually educated at Oxford and Cambridge.