“NEW YORK (Reuters) – It’s time for defense, says Bill Gross, manager of the world’s largest bond fund.
Gross, manager of PIMCO’s $250 billion Total Return bond fund , used American football as a metaphor for his investment model in his March newsletter. He wrote that he has turned defensive as he watches out for potential downside risks and warns about the government’s increased demand on available capital in the economy.
“Over the past 30 years, an offensively minded Federal Reserveand their global counterparts,” or other central banks, “were printing money, lowering yields and bringing forward a false sense of monetary wealth,” Gross wrote.
“Successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills,” he added.
He pointed out that “low yields, instead of fostering capital gains for investors via the magic of present value discounting and lower credit spreads, begin to reduce household incomes, lower corporate profit margins and wreak havoc on historical business models connected to banking, money market funds and the pension industry.
“The offensively oriented investment world that we have grown so used to over the past three decades is being stonewalled by a zero bound goal line stand,” Gross said. “Investment defense is coming of age.”
For example, these have been hard times for retirees who depend on interest income from their fixed-income investments to pay their bills.
“It is Main Street that has failed to keep up with Wall Street and corporate America in the race to see who can benefit more from lower yields,” Gross wrote. “As the interest component of personal income gradually weakens, the ability of the consumer to keep up its frenetic spending is reduced.”
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No, don’t listen to him. He’s a nut. He crackers, off his rocker. Don’t listen to the Bond King. Keep doing exactly the same thing…
Well he is nuts from the perspective of his very recent advocacy for more drain on the private sector in the name of feeding the gummint maw.
NOW he’s worried about the government’s appetite for capital?
Sorry Scotty, this asshole talks his book worse than Soros and Buffet put together.
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On this one, I’m with the Gint–except for the Soros and Buffet part.