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U.S. May Already Be in Recession: Rob Arnott

There's an old saying that poses the question: Do you want to hear the good news or bad news first? The thinking is that the order in which you are given information will somehow impact your reaction to it. But what if the bad news was actually good news — or at least presented a good opportunity?

Such is the mindset of Rob Arnott, chairman of Research Affiliates and manager of the five-star rated PIMCO All Asset Fund (PAAIX) and the All Asset All Authority Fund (PAUIX), who is troubled by a market that "shrugs off" everything yet is still closing in on all-time highs. "I'm concerned. I think we're definitely in a slowdown relative to last year — which was anemic enough — and quite possibly already in recession," he says in the attached video.

That's not to say he is out of ideas. On the contrary, he clearly states that no matter what the economy is doing, "there's always something interesting to invest in." For him, there are far too many bulls and far too few bears out there right now, and that presents an opportunity.

"If you look at advisor sentiment surveys, you find that right now there are fewer bears than have been seen in these surveys except at extreme major market tops, such as in early 2000," he says. "When it gets to be downright embarrassing to be a bear, doesn't that make for a wonderful time to take some risk off the table?"

Part of his concern that the economy has stalled comes from the fact that fourth-quarter GDP plunged to a three-and-a-half-year low of -0.1%, despite the fact that companies accelerated dividends and bonuses ahead of the tax increase. Since that activity was supposed to have happened in the first quarter, but was clawed back into 2012 instead, Arnott is understandably concerned about what this quarter is going to look like without it.

He's also of the mind that "policy direction of late has become very, very dangerous" and that ''nothing is a bargain" right now. Yet he insists "even when mainstream stocks and bonds are expensive and rather vulnerable," there are still "lots of places to find interesting investments."

In particular, he is interested in emerging market stocks and bonds, both of which offer better yields, growth rates and, of course, opportunities.