|When I'm sixty-four
|Mr. Gross advocates government measures that attempt to stop the slide in housing prices. Oh, and he's turning 64.
|Bill Gross, Jimmy Stewart, and banking
|Beware our shadow banking system
|"The tangled web of subprimes has claimed more than its share of victims in recent months: homeowners by the hundreds of thousands, to be sure, but also those who created, packaged, insured, distributed, and ultimately bought what should have been labeled "junk mortgages" but which by a masterstroke of marketing genius received a more respectable imprimatur."
|What do they know?
|"Bernanke, however, may face a problem with this elevator-based ease in monetary policy. As I have pointed out in prior pages and Outlooks, globalization and financial innovation have enormously complicated the job of central bankers. Whereas in prior decades a "one size fits all" policy rate move has coincidentally and democratically affected households and corporations alike, the 21st century has ushered in an innovation revolution favoring corporations with global investment opportunities as opposed to individuals with daily bills to pay. The same 4.75% rate is not and cannot be "neutral" for both sides in today's U.S. economy. Whereas current yields are not restrictive for investment grade corporations with global opportunities, they are far too high for homeowner Jane Doe and two million of her neighbors facing higher and higher monthly payments on adjustable rate mortgages. Should Bernanke put on a brave face and freeze the elevator and rates in mid-descent, he risks exacerbating a housing crisis in the making. Yet, should he favor the homeowner over the corporation, he risks reigniting speculative equity market behavior, and - in addition - a run on the dollar."
|Tough love on Wall Street
|"The past few weeks have exposed a giant crack in modern financial architecture, created by youthful wizards and endorsed for its diversity by central bankers present and past. While the newborn derivatives may hedge individual institutional and sector risk, they cannot eliminate the Waldos. In fact, the inherent leverage that accompanies derivative creation may foster systemic risk when information is unavailable or delayed in its release. Nothing within the current marketplace allows for the hedging of liquidity risk, and that is the problem at the moment. Only the central banks can solve this puzzle, with their own liquidity infusions and perhaps a series of rate cuts. The markets stand by with apprehension."
|Bill Gross's British stamps outperformed Pimco fund
|"Bill Gross's British stamps, which go on auction in New York on June 11 to benefit a charity, have proven to be a better investment than his bond fund. The manager of the world's largest bond fund stands to raise $5 million or more from the stamps he bought for $2 million, mostly in 2000, said Charles Shreve, Gross's stamp adviser. His $104 billion Total Return Fund had a 6.9 percent average annual return in the past 10 years, according to Morningstar Inc. data."
|Why you'll grow rich...very slowly
|"In the past decade, we've ridden two jaw-dropping bull markets. First came stocks. Now real estate is the bubble du jour."
|Doom and gloom abounds in Bill Gross' latest missive.
|Sizing up social security
|"Where Social Security and privatization supporters err is with their assumption that retirees' goods and services can somehow magically be generated or even multiplied by the existence of a certain amount of government or private IOUs. They cannot, at least within the U.S. borders. Production can only come from employed workers and so the basic solution is to produce more workers, either through immigration or postponed retirement for the existing workforce. Productivity gains are often advanced as a solution but employed workers cannot be expected to hand over future advances to retirees without a fight."
|"there's no doubt that the dollar is on the run and that higher U.S. interest rates are the inevitable consequence. Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries."
|"one of PIMCO`s new strategic bets based on this hypothesis is to own intermediate TIPS with real yields higher than 0.5%. We`ll be voting with our dollars."
|Con job redux
|"My point, however, was as follows. The CPI inaccurately calculates Americans' cost of living."
|Haute con job
|"The CPI as calculated may not be a conspiracy but it's definitely a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival. If the CPI is so low and therefore real wages in the black, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line. If real GDP growth is so high, tell me why this economy hasn't created any jobs over the past four years. High productivity? Nonsense, in part s and that real GDP is 1% less."
|"When somebody as smart as Bill Gross warns of trouble in the economy, it's usually worth a listen."
|Anything but rreasuries - and JGBs
|"This month's discussion will center on the durational position of a "reflationary" bond portfolio that might be characterized as thrice damned damned if you shorten, damned if you lengthen, damned if you don't do a thing."
|The last vigilante part II
|"Hopefully by extensively reviewing the E-mail exhibit on the preceding page, clients and interested readers can understand the bulk of our strategies designed to benefit from current reflationary attempts."
|The last vigilante
|"Simply put, it means that borrowers will pay more in real terms, affecting consumption, home building and buying, business investing, and government deficits alike. The lower real interest rate "wind" at their backs will instead turn into a mild headwind. The economy will slow. It may falter."
|Tom Hanks - Portfolio Manager
|"That history points towards an environment of lower than expected real rates of interest, low total returns for bonds (a 4% total return future world), an apparently overvalued corporate sector, and intermediate maturity bonds that should perform equally with long bonds at half the volatility. The one bond investment that fits into each of these boxes? Intermediate maturity TIPS."
|What, WE Worry?
|"Well, maybe I.m just pessimistic because I.m a Californian and the not so Golden State currently resembles the pulp not the juice of its once famous oranges. But California is 15% of the nation and it is the trendsetter in more ways than fashion, Hollywood, and tongue rings. We have a huge deficit based on overspending which was in turn based on the anticipation that financial markets and their capital gains would continue indefinitely. Our schools are a mess. Businesses are departing daily to points unknown. But this Outlook will not be a California diatribe. I use it only to suggest that as California goes so goes the nation and at the moment its prospects are not good, Terminator or no Terminator."
|Questions for the genie
|Bill Gross talks about inflation, interest rates and the outlook for bonds.
|What a fool believes
|Bill Gross continues to be negative on stocks and takes a swing at proforma P/Es