TIPS look great, to not buy a TIP at 1.5 percent breakeven is to suggest that the Fed simply can't reach their objective, that they can't print enough money. I think they can. Bill Gross More Quotes by Bill Gross More Quotes From Bill Gross I am Kobe. You are LeBron James, i have five rings, you have two rings - probably going to five. Bill Gross business I've had a wonderful ride for over 40 years in my career - trying at all times to put client interests first while inventing and reinventing active bond management along the way. Bill Gross business Interest rates in much of the developed world are distorting and limiting future returns below historical expectations. Bill Gross business Negative returns and principal losses in many asset categories are increasingly possible unless nominal growth rates reach acceptable levels, i don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories. Bill Gross top-news Banks, insurance companies, pension funds and Mom and Pop on Main Street are stripped of their ability to pay for future debts and retirement benefits, central banks seem oblivious to this dark side of low interest rates. If maintained for too long, the real economy itself is affected as expected income fails to materialize and investment spending stagnates. Bill Gross top-news The reason nominal growth is critical is that it allows a country, company or individual to service their debts with increasing income, allocating a portion to interest expense and another portion to theoretical or practical principal repayment via a sinking fund, without the latter, a credit-based economy ultimately -devolves into Ponzi finance, and at some point implodes. Watch nominal GDP growth. Bill Gross top-news They buy the bonds by printing money or figuratively dropping it from helicopters – expanding their balance sheets in the process, they then remit any net interest from their trillions of dollars or yen bond purchases right back to their Treasuries. The money in essence is free of expense and free of repayment as long as the process continues uninterrupted. Bill Gross top-news Chair (Janet) Yellen and others will be disheartened by this change in culture. Bill Gross top-news Capital gains and the expectations for future gains will become Giant Pandas – very rare and sort of inefficient at reproduction, i'm saying that developed and emerging economies are flying at stall speed and they've got to bump up nominal GDP growth rates or else. Cross your fingers. Bill Gross business The real market and the real economy await a different conclusion as losses from negative rates result in capital losses, not capital gains, investors cannot make money when money yields nothing. Unless... nominal GDP can be raised to levels that allow central banks to normalize short-term interest rates, then south instead of north is the logical direction for markets. Bill Gross business I think central banks have gone too far...certainly the ECB (European Central Bank) and the BoJ (Bank of Japan) have gone into negative territory and I think there are long-term consequences for that, the closeness to the zero-bound (interest rates) basically robs savers of their ability to earn money and threatens business models, such as insurance companies and banks in terms of their margin - and certainly, pension funds in terms of their ability to earn money. Bill Gross business We sold the bonds the first day that the problems arrived - and that was three months ago. Bill Gross business A 30-year Treasury at 2.5 percent can wipe out your annual income in one day with a 10 basis point increase. Bill Gross company-news A 30-year Treasury at 2.5 percent can wipe out your annual income in one day with a 10 basis point increase, the secret in a negative interest rate world that poses extraordinary duration risk for AAA sovereign bonds is to No 1, keep bond maturities short and No 2 borrow at those attractive yields in a mildly levered form that provides a yield and expected return of 5-6 percent. Bill Gross business But it can be done, closed end funds at deep discounts, highly certain acquisition arbitrage stocks, as well as volatility sales at tails are general examples. Bill Gross business There are a lot of closed-end funds that are selling 10-15 percent discounts to net asset values. That means you are buying something at 80-95 cents on the dollar, some of these closed-end funds deal in, yes, relatively high-quality municipal bonds. Bill Gross business I would stick to high-quality sovereign debt, as in U.S. Treasuries. Bill Gross business It is true that if much of the developing world is younger demographically (think India), then developed nations could and should transfer an increasing percentage of their financial assets to emerging markets to help foot the demographic bills back home, long term then, as opposed to currently, think about increasing your asset allocation to the developing world. Bill Gross company-news Demographics may not rule absolutely, but they likely will dominate investment markets and returns for the next few decades until the Boomer phenomena fades away. Bill Gross company-news Asset returns will therefore be lower than historical norms, especially because interest rates are close to 0 percent in developed countries. Bill Gross company-news
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