Barron’s Roundtable member Gross reflects on the dangers of global debt, and suggests two ways for investors to profit in a low-rate environment.
Bill Gross: Buy TIPS and This Closed-End Fund
1/17/2015 2:46AM
Gross: Buy TIPS and BlackRock Build America
January 19, 2015 5:30am by Barry Ritholtz
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Gross says that if there’s not enough return on savings, we won’t get enough savings. This is bizarre. The return on savings is low precisely because there are more dollars seeking investments compared to investment opportunities. When supply (money looking for an attractive return) exceeds demand (business and government wanting to borrow), the price (return) goes down. Does he believe businesses will want to borrow more if interest rates go up?
Of course, we have to be careful not to confuse cause with effect. A slower economy tends to lower interest rates, while low interest rates tend to stimulate the economy.
Yes when you look at a multivariate chicken or egg scenario it is easy to become confused. But it should be clear to all that anybody who think savings will be reduced if people cannot get sufficient return on their savings, need to get out a bit more.
– Is Gross a follower of the “Austrian School” ?
– “Buy TIPS” ? When the US is on the cusp of deflation and rising interest rates ?
More like oil buggery: when oil price recovers it will be ‘inflationary’ WRT the $USD so you could keep your money safe in a govt security but pick up a couple points maybe; that’s what it sounded like anyway.
Personally I’d be more inclined to go with floaters if I was thinking in those terms — quicker response and more direct relationship to interest rates — but, whatever, Gross frequently talks his own book and is perfectly capable of touting when he wants to goose a position so no way to tell what he really is doing until well after the fact.
His predictions will do as well as anyone else’s
Mr Gross obviously did not listen to Mr Gundlach’s conference call last week.
Per Gundlach, “TIPs are for losers.”