What Worries Bill Gross . . .

Pimco’s Bill Gross is nervous:

1) The current rather mild U.S. recovery has been driven by asset appreciation/consumption and not employment or capex growth.

2) Future growth is dependent on additional asset
appreciation in real estate and stocks if Asia continues to absorb much
of our investment and many of our jobs.

3) Recent asset appreciation has been set ablaze by
several fiscal/monetary pumps displayed on page 2 with 5-year real
rates being the central driver/gasoline can.

4) Tax cuts are a thing of the past and 5-year TIPS yields can theoretically decline only 60 basis points or so more.

5) The reason why intermediate/long TIPS have an interest rate floor is that if we approach potential deflation, investors risk losing money on a government guaranteed investment. The same concept applies to homes, stocks, and other inflation-adjusting assets without
government guarantees.

6) The Fed may soon be out of fuel, despite hints of
Bernanke-style helicopter money. Stocks and houses are already at low
yields and high prices reflective of European economies nearing
Japan-style liquidity traps.


Investment Outlook                                    
Bill Gross | July 2005                                    

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What's been said:

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  1. BigD commented on Jan 6

    c’mon barry, this is from 6 months ago…

  2. Anon commented on Jan 6

    Barry likes posting old stuff. I thought strategists were supposed to be neiither bullish nor bearish?

  3. Andy Nardone commented on Jan 6

    I’m with BigD on this one. Come on Barry, this is out of character. I’ve come to appreciate your “lone wolf” style, your discipline of independent thinking.

    Whether you like posting old stuff or not, the timing of trotting out Gross and months old commentary to corroborate your outlook, in the face of a market that seems to want to go up, gives an appearance of weak knees. And we know that ain’t the case, right?

    Perception is reality.

  4. julie commented on Jan 6

    Just because something wasn’t published 2 minutes ago idoesn’t mean the concepts aren’t relevant.

    A “strategist” who is not working on models of reality which suggest strategies for success is simply a fact collector. Indeed even straight analysis requires theories on the nature of what’s happening, theories which ideally can be tested.

    And in market strategy or analysis these involve possible directions of the market.

    Anon your comment is utter bs, a typical rigtwing game of making false, but superficially plausible statements to fool those who don’t parse sentences into meaning, to convince the stupid that the target of your dislike is vaguely unethical and not worth listening to because he has an opinion different than yours.

  5. Barry Ritholtz commented on Jan 6

    Typically, when you see something old like this pop up, its because I diaryed it sometime ago.

    I thought this was interesting back in July — but because I was Bullish for the 2nd half of the year, I didn’t want to throw it out back then.

    (When its a few weeks old, its because its a subscription only source, and I am trying to respect their copyrights — like when I all-but-steal something in its entirety from my colleague Alan Farley at RealMoney.com).

    Note that there are numerous other items scheduled for the next 6 months. . .

  6. Jon commented on Jan 6

    Bill Gross is managing a fund with huge fixed income positions. In other words, he “talks his own book”. Any trader would. If he doesn’t believe in his own positions, no one else would. He is not an unbiased analyst and shouldn’t be seen as such.

    On another note, if readers have to look down to the souce tag to figure out when the quotes were dated, something is wrong with the presentation. The first line should be when the information was published. Gross’ opinions change frequently.

  7. Anon commented on Jan 6

    “(When its a few weeks old, its because its a subscription only source, and I am trying to respect their copyrights).”

    PIMCO provides commentaries by Bill Gross et al. for free. Regardless, you do use fairly current NYT and WSJ graphics…what about the copyright issues there?

  8. PC commented on Jan 7

    As far as I am concerned the only reality is price action. And right now price action says the US stock market wants to go higher. I don’t fight the tape.

    If and when Barry’s bearish scenario comes forth, price action will also tip its hand and there will be plenty of time to get ready. Best not to jump the gun with opinions and predictions.

    As Jesse Livermore said, “It’s not the bull side or the bear side that counts in markets but the RIGHT SIDE.”

    As for Gross whom has been wrong on the bond market in 2004 and a good part of 2005, his latest commentary states that “the bond bear market is about over based on his indicator”. The jury is still out on this one.

    An ominous sign is Friday’s unemployment figure came in way below consensus and is very bond bullish. Yet Treasurys could not rally. When a market cannot rally on bullish news, this means its tone is weak and may want to decline.

  9. Barry Ritholtz commented on Jan 7

    The NYT stuff is free (not sub only); My “Fair Ue” excerpts are certainly not a copyright violation.

    As far as the WSJ, what I quote is also well within the Fair Use rules for copyright — I rarely copy entire columns, excerpting a few paras, and commenting, annotating, discussing them extensively.

    The one exception: The very under appreciated Journal online-only segments — the WSJ itself does a pretty poor job promoting it, which is too bad — as you have seen, a lot of that stuff is great — Parsing the Fed, the analysis of electoral college, the economists quotes on NFP Jobs or Inflation (they use lots of content which is not the WSJ’s — so I feel even more comfortable referencing/citing/excerpting that).

    The Online WSJ is overlooked by many, and I am only trying to bring it into wider attention. I cannot begin to count how many times I have said the $40 per year for the WSJ online is a must have.

    Maybe that explains this: Once, I was contacted by a lower level salesgeek looking for a fee for some usage — I sent an email to them & WSJ legal, asking for a clarification of fair use, and whether I should simply drop everything WSJ related from the blog.

    To their credit, they went away. More than most media, the Journal is pretty blog savvy — note the free stuff they shoot out to bloggers all the time.

    If they ever asked me chill out, I certainly would; But I think they are too smart for that (he said, further ingratiating himself weasel like into the bowels of the editorial/business staff. . . . )

  10. royce commented on Jan 7

    I agree about the Journal’s staff. Twice I’ve sent e-mails to reporters asking for clarification on something I saw in articles about personal finance and both times the reporters replied within 24 hours with explanations. I don’t know of another big news outfit with reporters that do that for an ordinary reader.

  11. Barry Ritholtz commented on Jan 7

    And, they include the email address of EVERY REPORTER ON EVERY STORY

    I’m waiting for the NYT to do that . . .

  12. Alopex Lagopus commented on Jan 7

    WSJ Online is $99. I just checked ($49 if you’re print subscriber already). For $40, I’d subscribe too.

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