Open Thread: Bill Gross Quote

I totally agree:

"It’s a sad testament to think the Fed has to cut interest rates eight days in front of a meeting to salvage the equity markets. The U.S. economy is in a rather sad state of affairs in that it depends on housing and stock prices to keep going.”

-Bill Gross, founder and chief investment officer, Pacific
Investment Management Co. (PIMCO)

>
Yes, I know its like throwing red meat in front of the lions — but have at it . .  .

>

Source:
Pimco’s Gross Says Fed Rate Cut a `Sad Testament’
Kathleen
Hays and Deborah Finestone
Bloomberg, Jan. 22 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aa3hU2DVr014&r

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What's been said:

Discussions found on the web:
  1. Warp9 commented on Jan 22

    BooYaa!!

  2. Jim Haygood commented on Jan 22

    A financialized economy is a Bubble economy.

    Bubble II (2002-2007) is dead; RIP.

    Bubble III (2008-20??) will debut any day now. “One percent forever!” as Mad, Bad Al used to croak.

  3. Ahmed commented on Jan 22

    Hey, Dont jump to conclusions so fast. Lets give them some credit. Cramer wanted a full percent cut plus the government buying out Ambac and MBIA. They didn’t give it all away today. Maybe they will make him wait for another day and announce a nationalization of the bond insurers when the futures point to the abyss.
    THE ELEMENT OF SURPRISE THAT Ben thinks he is delivering with an emergency rate cut every time the Asian markets sell off (by the way propping those markets too ) is no more a surprise. He has delivered each time the futures were looking down the cliff.
    Welcome.. the females of the canine species

  4. alex norman commented on Jan 22

    I agree with his general point as well, but methinks Gross is being a little disingenuous here.

    He has been calling for aggressive rate cuts since last spring…as the Fed has eased, his fund has been up–12% on a TTM basis.

    He is massively long the front end of the curve, and is laughing all the way to the bank.

    So he gets to chide the “adolescents” of the equity markets as a sober “bond guy” while at the same time looking like a genius b/c he predicted FF at 3% before the end of the year.

    Remember he’s the guy who was one of the first market participants calling for Govmint intervention in the crisis. Bush grants his request, the world markets sniff, and Ben caves with an emergency cut.

    All is very well in Newport Beach…

  5. Bruce F commented on Jan 22

    Speaking of the next big bubble. If you want to read a long “big picture” kind of article, check out the Feb issue of Harper’s magazine. There’s a story by Eric Janszen titled “The next big bubble: Priming the markets for tomorrow’s big crash”.

    I don’t know if non-subscribers can access it online, but you can try it here:

    http://harpers.org/archive/2008/02/0081908

  6. AJF commented on Jan 22

    Bernanke: Damned if he does, damned if he doesn’t! He inherited this mess, yet ANYTHING he does (or doesn’t) do leaves him as a target for the talking heads. Cut the guy a fucking break. Seriously. By the way, my favorite quote of the day came from Ron Insana, now of fund of fund of funds of funds at Insana Capital Partners fame; he stated something to the effect that Bernanke et al should attend one of Bush’s financial literacy workshops. This coming from a man who, according to his CNBC.com bio, has ZERO formal financial education! Sure he may have been a reporter for however many decades, but that does not make him a portfolio manager. I’ve been staring off into space for four decades, yet I don’t claim to be a fucking astronaut!

  7. John Borchers commented on Jan 22

    It’s sad but they are trying to avoid what happened the first time in 1929 when no one would protect the banks and they went under. It’s the bad cycle that was referred to today (one bad thing takes out another and another, etc, etc).

    So they are trying to avoid a depression type economy. Can they?

    Ben had big talk when he came in about people taking risk have to be responsible but then totally backed down when push came to shove.

    In short I think the damage is already done or will move elsewhere. I think most of the credit problems are now in credit cards and not homes. Time will tell.

  8. KirkH commented on Jan 22

    If that was a salvaged market I think I want to opt out of salvation.

    Bernanke is a drunk teenager at the zoo, eating beef jerky, taunting the mediocrially caged bears. He’s on a first date with Goldilocks. The sea was angry that day…

  9. RW commented on Jan 22

    I took the Fed’s early rate-cut as an evaluation of the financial stimulus package proposed by the current administration: It will be ineffective, a non-starter even if passed in a timely fashion.

    I get the feeling sometimes that the Fed has not so much been paying obeisance to whoever rules the roost in DC as trying to compensate when it becomes clear the rulers either do not understand what they should be doing and/or are simply unwilling to do what is fiscally necessary because it’s not ideologically palatable or politically advantageous.

  10. Mike M commented on Jan 22

    I read somewhere that Paul McCulley was begging for rate cuts before the “crash”.

  11. Doug Watts commented on Jan 22

    The good news is that people are being very diligent about ordering vegetable seeds for spring planting.

  12. SINGER commented on Jan 22

    Gross did get the call on the 10 yr right…

    Its not like the situation we are in developed overnight…This has been evident to anyone (w/o an agenda or vested interest) for a long time…The only question was WHEN would it crack…

    SHOULD WE TALK ABOUT THE FACT THAT THE FED IS OWNED BY THE BANKS AND THAT THEY WILL INEVITABLY DO WHAT THEY NEED TO TO HELP THEMSELVES AKA RELIQUIFY BY STEEPENING THE CURVE…

    They maintain power…Americans and their purchasing power just stay fucked…

  13. 2and20 commented on Jan 22

    it’s funny, but the fact that the Fed was always potentially there in the background ready to slash rates to pump the market higher was partly responsible for such big falls the last couple of days.

    like a lot of folk who were short i reckon, i cut my shorts following a decent fall last thursday due to all the talk of bernanke coming in slashing rates, thinking a bounce would come…then when the markets started to puke, i suspect there were far fewer shorts around to soak up any selling pressure, resulting in some huge moves down.

    if the Fed would just stick rates at whatever they think is a suitable level, during a scheduled meeting, the markets can then focus on pricing risk appropriately, without shorts risking getting burned for all these surprise cuts whilst the market is closed (eg today AND the discount rate cut last August).

  14. Hubris Sonic commented on Jan 22

    Well, the markets here in Tokyo seem to like it anyway, so…

  15. Pat Gorup commented on Jan 22

    “Bernanke: Damned if he does, damned if he doesn’t!”

    The FED’s two purposes are to promote employment and price stability. From a historical perspective, a 5% unemployment rate is considered acceptable. Creating more inflation by cutting rates doesn’t provide price stability.

    It’s the old adage: “do no harm”.

  16. Stuart commented on Jan 22

    The question then is, what does the Fed see that would prompt a 75 bps cut 8 days ahead of a scheduled meeting?

  17. CaptiousNut commented on Jan 22

    Gross has been right for 6 months. But Remember in June he called the start of a bond bear market.

    Aside from that, Gross is a FJO. Before it’s all said and done he’ll get his comeuppance. The next 5-10 years are going to apocalyptic for bonds. With any luck, he’ll end up in a padded room across the hall from Cramer.

  18. Winston Munn commented on Jan 22

    Anyone who is surprised or caught off guard by this Fed’s actions simply isn’t paying attention. Bernanke and his clone, Mishkin, have been writing and speaking about this scenario since grad school.

    The system open market account has been draining for months and that is why the markets faltered so badly since the summer high – so to think Bernake gives a rat’s ass about the markets is simply to not understand his motivation. The market is simply part of the tool to foretell the future to him.

    And with his panic today, he signalled loud and clear that he in instituting his plan to combat deflation.

    And deflation has been the great fear of this Fed this whole time. Bernanke understands one thing well – a collapse of the credit markets is a deflationary event.

    The bigger the credit bubble, the more serious the likely deflation to be.

    This one looks like a doozy.

  19. Tim Abbott commented on Jan 22

    Hi Barry – I love the blog. I am trying to subscribe via Feedburner and I keep getting an error message. Is it just me or is there an issue with subscribing?

  20. AGG commented on Jan 22

    And now the dollar is tanking.
    2008 will be remembered as the year a first world economy morphed into a banana republic by slipping on a banana peel market.

  21. s commented on Jan 22

    Someone shoiuld thank riclk santelli from CNBC – he is the only person on the network with any sense. HE took Cramer to school this moring after Cramer tried to embarrass a contributer. Cramer is a great take down artist. Maybe he can tell us again how he went to Harvard and its so much smartert than everyone. Maybe he should take his seed magazine and go choke on it. Santelli made Cramer look like the joke he is. The entire staff at CNBC is a joke. And Rich Farrell, he is long bank stocks 40% higher. Talk about 9 lives.

  22. Drewbert commented on Jan 22

    I’m no accountant, but I’m pretty sure they can only do this a few more times before they’ll have to come up with a “Plan B”.

  23. Sammy20 commented on Jan 22

    Man, it is going to suck one of these days when the futures are up 550 and the Fed raises rates 75 points and Paulson talks down the economy.

    It would be funny how different the Bull/Bear argument would be if the government in fact cared about the dollar and currency destruction and false asset valuations….maybe the broken clock comment would be given a rest in this environment.

  24. Robert commented on Jan 22

    Buffett on the markets:

    1. read his annual letters which are all on-line about the derivatives he did not know he bought when purchasing General Re,,,years later he still has some. don’t you all remember his warnings !!!

    2. back in 2000 he warned that we would be in a 10 year BEAR MARKET. Don;t be shocked. we are in the midst of it and much more to go. do you see him buying anything of significance with his 40 Billion dollar war chest.

    3. didn’t anyone notice that within the last month he sold ALL his PETROCHINA !!!

  25. ken h commented on Jan 22

    I agree Munn,

    Problem is, we have Biflation. I still think we are in early innings yet everone is talking bottoms? I would not buy anything for awhile but I’m a sexy J6P supermodel? What’s a friggen joke to me is why anyone is buying stocks based on what the Fed does unless,…maybe financials? Does it make a companies balance sheet look better? This is all noise on the way down, wake me up in 2009!

    F’ing Cramer, what a tool, I think CNBC is putting him out to dry. They let Rick just open a can of STFU. It was nice, thanks Rick! He also showed what little knowledge he has on the problem in mortgages. Hey Cramer, Ben can cut to zero and that ain’t going to help these scumbag speculators who bought at the top. Their houses are dumping 25-30% equity. zero interest wouldn’t help these bozo’s.

  26. Bloated Jeff Macke commented on Jan 22

    bill who? oh the only bond manager who didn’t make any money as the curve inverted from 2002-2005. the same bill who decries ABS, MBS, CDOs and anything housing related while trying to gather billions for a vulture MBS fund AND while PIMCO manages billions in CDOs. the CDS sky is falling, that bill gross? hmmm…….

    Willaim Gross, you are a friggin double talking tool

  27. algernon commented on Jan 22

    Gross could express it more fundamentally by saying our economy depends on fresh money being borrowed that has never been saved. Because it has just been freshly created

  28. FT Woods commented on Jan 22

    Ken H,
    Could you talk about ‘biflation’ in more detail? That seems spot on with what’s happening. There’s not much information out there. I’m also confused about wages which have been stagnant for some time so I don’t see where they fit into things.

  29. Keith Shepard commented on Jan 22

    Bill Gross is part of the problem. What a flaming review-mirror-back-stabbing twunt.

  30. booyah commented on Jan 22

    oh the only bond manager who didn’t make any money as the curve inverted from 2002-2005.

    Investor returns

    10 yr annualized on VFINX 5.23%

    10 yr annualized on PTRAX 6%

  31. Eclectic commented on Jan 22

    Captious,

    You’re incorrect about your assessment of Gross’ expectations for bond yields to rise.

    At the time you referenced, Gross had suddenly upped his (3-5)-year target for the 10-Y-T (within just days of posting a lower target in his most recent letter), but had not yet withdrawn from his lowest short-term expectations for its yield.

    It was approximately the day after NZ had suddenly spiked their equivalent of our FF rate in an attempt to slow inflation largely linked to dairy price increases. I itemized Gross’ change and the NZ rate increases here:

    http://bigpicture.typepad.com/comments/2007/06/its_a_low_low_l.html

    Later he also backed away from his lowest short-term estimate for the Ten.

    I can’t speak for Gross, nor do I have any acquaintance or affiliation with him, but my guess is he might not have raised his (3-5)-year targets for the Ten as much, nor would he have backed away from his lowest short-term estimates for the Ten, had he been able to see the full magnitude of the coming financial crisis.

  32. malabar commented on Jan 22

    Come on! Bill Gross please give us a break. PIMCO put out a press release yesterday with McAulley urging the Fed for an emergency rate cut.

    Don’t talk out both sides of your mouth. We common folk aint all retards!!

  33. Peter Davis commented on Jan 22

    I’m just waiting for the Bernanke and Dubya to announce their plan to nationalize the stock market in order to force it to go up.

    Oh, excuse me. That was Cramer’s plan.

  34. Marcus Aurelius commented on Jan 22

    The question then is, what does the Fed see that would prompt a 75 bps cut 8 days ahead of a scheduled meeting?

    Posted by: Stuart | Jan 22, 2008 9:35:20 PM

    __________

    The Fed saw exactly what we saw over MLK holiday – Asian markets in precipitous decline. We shouldn’t forget that the market opened 460-odd points down, and never once broke positive – despite the cut. The addict has been given his fix early – strengthening his addiction and reducing the time before he screams for more. Bernanke’s stash is almost gone.

    Never trust a junkie.

  35. Winston Munn commented on Jan 22

    Eclectic wrote, “had he been able to see the full magnitude of the coming financial crisis.”

    Do you mean as time frame the financial crisis from then until now or what is yet to come?

  36. Chief Tomahawk commented on Jan 22

    Maybe it is time to take $1,000 U.S. and by Iraqi currency…

  37. Dave commented on Jan 23

    Honestly,

    All I will say is that I continue to lose respect for a surprising number of financial people as this situation plays out.

    America is blindly addicted to rate cuts and it starts at the top. They don’t even care what the consequences are. “Just keep the pain away Mr. Bernanke.” They basically just want more morphine, even though we are increasingly closer to the maximal dose.

  38. JasRas commented on Jan 23

    I heard the quote this even and now see it in writing. No where does he say he doesn’t want the cut–I believe his comment is about the delivery of the cut, i.e. not the “what”, but the “how”. Anyone whose read Gross commentary will know he has said cuts would come, cuts were needed. The difference in how today’s cut was delivered to the market and how it should have been delivered, is like the difference between a high school musical and a broadway musical; The lines are said, the song is sung, what more do you want…it’s all the same. Wrong!!!

    This cut was delivered from a point of weakness. It appeared as though he was bowing to a lame duck administration. He made the Fed look like a pawn, rather than in charge. Half the Fed’s value is its impression and perception. The cuts? They are merely the lines to be delivered to the audience.

    This cut was delivered nearly two weeks after Ben publicly stated a willingness to cut at a moment’s notice. Then the moment passed, days, and then nearly two weeks. People left the station because they were sure the train wasn’t coming!

    I am still lean to the camp that cuts are pushing on a string, but the only true way to know is to try. But this Ben has no panache, no drama, no sense of timing. Even Greenspan would have chosen Friday over Tuesday! Do you think the foreign markets would have tanked on a U.S. holiday and run the risk of getting upside down with a massive rally? Friday would have caused maximum pain to the short term traders of options. Friday afternoon would have caught people off guard as it tend to be a down day in a down trending market. But Ben’s got no style. He is an autistic academic.

  39. dukeb commented on Jan 23

    Clearly, the double-talking enemies are within. And I lost my blue pill! (Speaking of which, I think Cramer most definitely didn’t take the ideal combo of meds this morning. I’ve often seen that become apparent in a few heavily prescribed NYC coworkers. It’s so damn obvious when they are starting a new formula or the old one is on its last leg. Though I suppose in this case, Cramer may be so lunatic fringe that his psychosis busted through the chemical roadblocks.)

    Santelli for President!

  40. Pat Gorup commented on Jan 23

    AP: “Jolted by global recession fears, the Federal Reserve slashed interest rates Tuesday. The Fed, announced its action after an emergency video conference Monday night. The urgency that we feel at home is now even more urgent as we see the impact of our markets on others, House Speaker Nancy Pelosi said.”

    There were two reasons for the rate cut:
    To grease the debt creation wheels for the U.S. consumer. AND
    To bolster foreign stock markets.

    The U.S. markets were closed Monday. Still don’t believe in the PPT??

  41. Johnny Vee commented on Jan 23

    The Nikkei might go negative–its getting close. This could be an fugliest bounce ever.

  42. Smarmy commented on Jan 23

    The banking system has the vapors, as in =POOF=, that hasn’t changed.

    Screw the monolines, pass legislation making insurance on securities illegal. Let them die as they should.

  43. Steve commented on Jan 23

    Yea,,, out in Cali where Gross is at it sucks… and I’m sure for 1 or 2 Wall Street types life sucks. But Kansas is just fine. There is a decoupling of the economy. But you don’t have to look around the world to find it, just look around the corner.

    It’s the end of the American century. And I want to thank you all for f…ing it up.

  44. bt commented on Jan 23

    Bernanke: Damned if he does, damned if he doesn’t! He inherited this mess, yet ANYTHING he does (or doesn’t) do leaves him as a target for the talking heads. Cut the guy a fucking break.

    Sorry, he gets no break because he is trying to reward speculators at the expense of savers and folks who were responsible. If he inherited problems from Greenspan, he should come out and clearly spell out how Greenspan screwed up. Instead, Bernanke is following in Greenies foot steps and trying to “surprise” the markets in an attempt to bail out, if not reward, reckless speculators.

    When I went to buy my first home (12 years ago) the mortgage agent told me “you qualify for much more loan than you are getting. sure you don’t want to buy a bigger home?” We said, no thank you, this is all the home we need. When I went house hunting to move to a bigger home a few years ago, we liked the model home and were wondering how much to offer (below the asking price, which we thought was ridiculous). While we were pondering, another couple walked in, instantly liked the home, and started asking the seller’s agent (homebuilder’s sales agent) how and where they could get a loan to afford that model home. No negotiation, nothing. Instead those idiots were getting advise from the seller’s agent on how to get a loan and how to get a second mortgage to afford the down payment. And there we were, with 60% down payment ready in the bank, denied the opportunity to negotiate a reasonable price for a home because an idiot just walked in and thanks to Fed approved reckless mortgage lending practices, made an offer on the home without negotiation and without the means to make a down payment.

    What about the rights of those of us who play by the rules, who live within our means, who save for our purchases, and who save for our retirement so we don’t have to be a burden on gubmint/society? These bastards at the Fed have been pandering to Wall Street and main street speculators by dropping pants, er rates, each time there is a remote sign of a problem.

    About the only rate cut that makes sense to me was the 1% rate cut after 9/11. That was a real emergency situation and the world needed some reassurance. No problem if the Fed cuts rates to 0% in response to such emergencies. Instead the bastards at the Fed use their power to bail out speculators and punish savers.

  45. drey commented on Jan 23

    Agree with you guys that Santelli is the cream of the crop – also dig the old sage Bill Seidman when he shows up.

    But forget all this crap about rate cuts, when do I get my $800 check from GWB?

  46. Eclectic commented on Jan 23

    Winston,

    Then to now, certainly.

    I haven’t read his latest Pimco letter, but I perceive from his guest shots in media that he’s also heightened his concerns for the current period extending forward… with more concern now than he had in June.

  47. Bob A commented on Jan 23

    After all… what’s the worse that woulda happenned? Markets go down another 20%? We coulda bought up China, Hong Kong, Mexico, Brazil shares another 10-20% lower. Giue us a litte negotiating power (just imagine hearing ‘negotiating’ the way fearless leader would say it). And all the buy and holders woulda done nothing and been back even within a few months anyway. Yeah thanks fed. You really saved us. Hero complexes.

  48. Bob A commented on Jan 23

    IF YOU EVER HEAR ME SAY ‘BOOYAH’ (after this of course) PLEASE SHOOT ME.

  49. Fledermaus commented on Jan 23

    With all the large writedowns and losses announced for the fourth quarter, hardly any attention is being paid to just how profitable U.S. banks really are.

    Jebus, THAT is the 1st sentence. And then it starts to go downhill.

  50. Francois commented on Jan 23

    @Stuart:

    Thx a mil for the link to Ackerman’s comment and chart. I must admit the chart is really troubling, and Ackerman’s explanation is better than any:

    “This is not the buying of mere institutional traders second-guessing each other so as to produce a raggedy series of lows. Rather, it is a buyer whose 1255.50 bid was set in concrete, fearlessly oblivious to the selling panics that had overwhelmed the world’s bourses for two consecutive days. [Who has the financial muscle to do such a thing?] The bid held for long enough to exhaust sellers, as it doubtless was intended to do, causing the major averages to rally back to unchanged on the strength of the massive short-covering that followed.”

    Free markets indeed!

  51. Flatulus commented on Jan 23

    Maybe someone can tell me when a bank is actually going to fail and not get bought out.

  52. tom a taxpayer commented on Jan 23

    In this choice headline Willem Buiter (Financial Times blog Jan 22) makes a similar point as Pimco Bill.

    “The Bernanke put: buttock-clenching monetary policymaking at the Fed

    It is bad news when the markets panic.  It is worse news when one of the world’s key monetary policy making institutions panics.  Today the Fed cut the target for the Federal Funds Rate by 75 basis points, from 4.25 percent to 3.50 percent.  The announcement was made outside normal hours and between normal scheduled FOMC meetings.”

    http://blogs.ft.com/maverecon/

  53. Steelduck commented on Jan 23

    I agree with Winston Munn (see above) as I reiterate my comment from a previous post:

    Mr Bernanke is one of the world guru on Depressions. He is probably obsessed by its specter. He may not be a trader, but he intimately knows the ups-and-downs of the market during the 30’s. Mr Bernanke must know something that we don’t about where this market is heading if left to its own and it seems that he is desperately trying to prevent it from getting there.

    Mr Bernanke made a bad call yesterday because he waisted one fifth of his ammunition with little results to show for. Worse, he may have irreversibly damaged his credibility.

  54. tom a taxpayer commented on Jan 23

    Drey – you asked when you get your $800 check. My $800 check already arrived. I speeded up the process by writing a $800 check to myself. After all, the government was only going to give me back $800 of my own money.

  55. Cherry commented on Jan 23

    Again, people simply don’t get it: DEFLATION IS HERE TO STAY.

    Once the credit bubble excesses that lags cycles come off(right the time commodities implode I suspect), deflation will show up in the numbers big time.

    Here is a stupid article:
    Last Friday, the best rate available on a 30-year loan was 5.5%, said Jeff Lazerson, president of Mortgage Grader, a Web-based loan shopping service. By Tuesday afternoon, it had fallen to 5.125% for borrowers willing to pay 1 percentage point in upfront costs.

    That’s likely to touch off a refinancing boom, he said.

    “For six months, you could have shot a cannon through here and not hit anyone,” he said. “Today, the phones lit up like we were having an electrical storm.”

    What’s more, $25 billion to $30 billion in adjustable-rate mortgages are “repricing” each month throughout 2008, said Greg McBride, financial analyst with BankRate.com. Because these loans typically adjust once or twice a year, Tuesday’s rate cut combines with other recent Fed cuts to provide many of the borrowers with a huge break.

    “This is going to save a lot of people from completely unmanageable payment increases,” McBride said. Someone with a $200,000 ARM would have been hit with a $370-a-month payment increase had the Fed not acted in recent months to cut short-term rates a total of 1 3/4 percentage points, he said. Now the hike will probably be in the range of $100 a month.

    … Rates on money market accounts and certificates of deposit have been dropping in recent weeks, said Ray Montague, manager of deposit research at Informa Research Services in Calabasas. And they’ll be dropping more within days. Several banks said their money market rates would come down as of midnight Tuesday, Montague said.

    In Arcadia, Lonell Spencer, a 79-year-old retired machinist who has tens of thousands of dollars in CDs, braced to lose hundreds a month in interest.

    “We don’t have an opulent lifestyle as it is,” he said. “This is going to make a difference.”

    Literally, are these idiots that dumb? The FED is going to skullbleep the CD’s into the ground and take the banks with them.

    Rates are going down because your assets are deflating. They will continue to deflate. Hence, rates will go down further. This is the spiral we are talking about with the collapse in the velocity of money. Re-fi boom my arse. Dummies.

    I bet I will get good cash returns on 0% in this deflationary period.

  56. Steelduck commented on Jan 23

    @Cherry,
    What do you mean: “The FED is going to skullbleep the CD’s into the ground and take the banks with them.”?
    Thanks++

  57. CaptiousNut commented on Jan 23

    Eclectic,

    YOU are incorrect in assessing the simple English I wrote.

    I said Gross has been “mostly right” except for his freak out in June.

    From June 7th,

    A long time bond market bull, the PIMCO manager says he’s now a “bear market manager” and has raised his forecast range for the benchmark 10-year U.S. yield to 4 percent to 6.5 percent. That’s up from last year’s forecast range of 4 percent to 5.5 percent.

    http://money.cnn.com/2007/06/07/markets/bondcenter/gross/index.htm

    Do you just like to tell people they are “incorrect” and throw a bunch words and links on the thread? Is that your MO?

  58. michael schumacher commented on Jan 23

    he may be a horse’s ass but I fail to see how what he is saying is untrue. That’s what got us here (and we prospered from it) now we start to see the downside of having 70% of GDP compromised of the consumer piling it on.

    It was doomed to fail from the start.

    Ciao
    MS

  59. glenn_in_MA commented on Jan 23

    Not a Bill Gross fan…but that quote is right on!

  60. ken h commented on Jan 23

    This is probably so late nobody will read it but Biflation is a period where needs like energy and food continue to rise while extras continue to deflate like housing, cars, plasmas, cell phones, etc. The Fed prints money for stimulus but people are forced to buy needs at inflated prices ad there is still deflationary presure on non-needs leading to lay-offs, and on , and on, and you get the picture. Global pressures change the game. Ben may have studied the thirties but this ain’t the thirties. But…as i speak, the speculative bubble in oil breaks with oil down to 87. Even if oil goes down to 70, it’s still at all time highs and global demand keeps energy and food inflationary. Ben’s tactic of fighting deflation kill the dollar and it’s ability to be the standard.

    Plus Ben reminds me of schoolmates in college(medicine) that where great at bookwork and theology but folded like a lawnchair when faced with the human condition. This isn’t a test tube and you had better know what the “F” your doing. He’s acting like a pussy to me?

  61. Eclectic commented on Jan 23

    Captious,

    I didn’t intend to attack you but merely to explain why your comments were incorrect. My MO is to usually back up what I say, so I’ll attempt to do it for you, but mostly for others who read me on this blog, and then leave the last word to you:

    I’ll quote you and ***make my own comments. In your challenge to me you said this:

    “I [you] said Gross has been ‘mostly right’ except for his freak out in June.”

    ***No, you actually said the exact following in your original comment:

    “Gross has been right for 6 months. But Remember in June he called the start of a bond bear market.”

    ***You’ve made two conflicting statements within that quote. Gross could not have been right for the last 6 months while at the same time having called for the start to a bond bear market during those same 6 months. Actually he has been right for far longer than just 6 months but only incorrect in magnitude. Anyone calling for a bond bear market beginning back in May-June 2007 was totally wrong. But Gross didn’t make such a call. Anything but. In the provided link to Gross’ May-June comments…

    http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+May-June+2007.htm

    …***notice his statement [reproduced here]:

    [With the possibility of creeping inflationary tendencies, especially in weak currency countries including the U.S., combined with the potential reduction of financial flow subsidies which to this point have favored fixed income vs. equity and real commodity investments, we come to the following range forecasts for the secular timeframe from 2007 to 2011.]

    ***And then notice he gives you a chart and depicts his 2007-2011 estimate of the range of the 10-Y-T in the U.S. to be from a low of 4% to a high of 6.5%. Needless to say, the range of years from 2007 to 2011 does not necessarily begin immediately in May-June of 2007, particularly when a forecast is being broken into short-intermediate versus longer term periods, and thus Gross was reserving that forecast for the future time he was identifying to be inclusive of part of 2007 but generally longer, even 4 or more years longer. Then the question remains: what did he anticipate for bonds in the short to intermediate term?… Well, he tells us in the same commentary from May-June 2007, and he even underlined the pertinent components of that commentary. Here it is, also [reproduced]:

    [Readers and clients again are alerted to the probability of yields closer to the lower end of our ranges during the weak cyclical environment of 2007 and 2008. The U.S. housing downturn has yet to reach bottom in our opinion and its influence on U.S. consumption and global growth yet to weigh in. Markedly different duration and curve strategies throughout the period therefore may be called for.]

    ***And true to these words, he then boxed his “Secular Forum Conclusions For the Next 3-5 Years” and you can review item 3 of the boxed table to find this specific quote: “A weak cyclical U.S. economy argues against bearishness short term.” Thus your statement that Gross began to call for a bond bear market in May-June is an incorrect assessment of what Gross said. I claim he’s been dead right but just a bit wrong at the margins. Barringo and all others who read my comments on this blog know that I have never wavered on my expectations for the direction of “My Sweet Bondie” and as you can see, Bondie has already blown the low end of his 3-5 year forecast. If you want to claim Gross has failed in any way, that’s a valid claim – failure to launch on part of his forecast, even before 6, or at most 7, months had elapsed.

    ***And so now we come full circle to explain why those who claim Gross was wrong are themselves wrong. He wasn’t calling for bond bearishness in May-June of 2007, but merely noting that he expected bonds to trend upward in yield into the range of 2007-2011. One can only suspect he was being influenced by Greenspan (hired as a consultant by Pimco around that time) who has called for essentially the same type eventual rise in bond yields in his tub-soaking by candlelight memoirs.

    ***I’ll end by repeating my own observations of Gross. I can’t remember the news commentator who interviewed him, but Gross within the last months of 2007 allowed himself to be head-faked out of his own “2-handle” call for the 10-Y-T during an appearance on CNBC. I expect that now he may wish he’d held to it, since we may be there within days, and I’m not so sure he’d have so quickly bounced his 3-5 year range on the Ten to as high as 6.5% either, had he been able to foretell current events. To tell you my own opinion, it may take a full generation to again see a 6.5 on the Ten, and that would be far longer than a coon’s age (Racoons – in the wild m-a-y-b-e 3-5 years):

    http://home.sou.edu/~rible/wildlife/raccoon.html

    I yield the floor permanently to you, Captious. Thank you for your vigorous challenge.

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