Gross Lambasts Central Bank Policies, says Investors Are ‘Mongrel Dogs’ in Search For ‘Tidbits’

In his latest treastise against negative rate policies, B. Gross likened the environment to a Vegas casino — as it pertains to credit and how it perverts everything.

“Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today’s highly levered world,” Gross said in his latest Investment Outlook titled “Doubling Down.”

“At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives,” Gross said.

“A commonsensical observation made by yours truly and increasing numbers of economists, Fed members, and corporate CEOs (Jamie Dimon amongst them) would be that low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth,” Gross said.

He added: “Our argument is that NIMs (net interest margins) for banks, and the solvency of insurance companies and pension funds with long dated and underfunded liabilities, have been negatively affected and that ultimately, the continuation of current monetary policies will lead to capital destruction as opposed to capital creation.”

All told, Gross said central bankers have fostered a casino-like atmosphere that present “a Hobson’s Choice, or perhaps a more damaging Sophie’s Choice of participating (or not) in markets previously beyond prior imagination. Investors/savers are now scrappin’ like mongrel dogs for tidbits of return at the zero bound. This cannot end well.”

Similarly, I can relate to good olde Bill’s prognostications, as  I’ve been predicting a fleeting doom since December of last year. The prevailing wisdom had been that central banks had overstepped their boundaries and their schemes, once laid bare, would result in massive FX dislocations — which in turn would cause EM to implode and contagion spread. This occurred in early 2016, but was halted after the Fed indicated they were just kidding about hiking rates and markets took solace in easy monetary policy.

Bull markets are difficult to stop and a fool’s errand to short with regularity. If you’re comfortable applying risk to your portfolios and have proverbial lines in the sand from which you can reduce exposure to markets, in the event of a pullback, go crazy and buy stocks. I’ve said this here on numerous occasions. Personally, I’ve been investing for over 25 years in markets, more active than anyone I’ve ever known. I’ve played the craziest tapes and made plenty of money doing it. I’m not doing that in 2016, after retiring from money management and deciding to only trade Exodus signals.

The cause that I’ve found a spirited purpose in is to expose the corrupt nature of the central banks and policy makers — using iBC as my bullhorn. I’ve found there’s a greater purpose to life than simply nailing the next trade. Maybe my philosophy on life will change in the future. But for now, that’s how I feel.