Gross On Inflation

June 2, 2008 3:30am by

Sounding the inflation alarm, with William Gross, Pimco founder & co-CIO:

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Gross

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  1. Jay Weinstein commented on Jun 2

    As noted often, this blog and many others have been hammering home this point for a very long time.

    But with all due respect to BR, Bill Gross is the Warren Buffett of fixed income, and his voice could well be the tipping point for this debate…

  2. BG commented on Jun 2

    I think Bill Gross is very polite in his assessment of the reporting of inflation, essentially saying it has been under reported for years.

    The thing unknown is how quickly and to what degree does this global change take place. The other variable involved here is our tremendous deficit which requires continual refinancing. This too will place upward pressure on interest rates. Any perceived shortage of US-denominated capital for financing our debt could (could) do to interest rates what the commodities traders have done to the price of oil.

    It’s just like the phrase Michael Douglas used in the movie “Wall Street” where “perception has now become reality”. There is truth in these words. The price of oil has moved from perception to reality. Is it justified? Does it really matter?

    Real inflation + a real lower appetite for US bonds will over time produce higher interest rates. The key again is how quickly and to what degree, this takes place. How this event is perceived by investors and exploited by the market-makers will determine the rate of change in future interest rates. We could be in for more surprises than just the price of oil.

  3. VennData commented on Jun 2

    To BG’s point: imagine the tax cut we could AFFORD if we paid off the debt and didn’t need to cover that interest? Not to mention our bloated military and their far-flung commitments to Afganistan, Iraq, New Orleans and seniors.

    To the post and JW’s comment: PIMCO’s short treasuries no (the raison d’etre behind the timing of this book-talking exercise.) That doesn’t make Bill Gross wrong, he’s correct, of course.

    Notice how there’s no mention of TIPs? These are the real – or should I say unreal, non-adjusted? – certificates of confiscation. Larry Kudlow frequently points to TIPs spread relative to ten years to talk about low inflation, but the TIPs are simply are bonds denominated in BLS decisions.

  4. Tom F. commented on Jun 2

    What a crummy hypocrite. If I remember correctly, this guy and his partner in crime McCulley were bitching for lower rates in spring and summer of 2007. Now they don’t like the consequences of what they got.

  5. michael schumacher commented on Jun 2

    Bill and Alan talking book again.

    Lower rates suck don’t they Bill??

    Loaded up and not getting those yields they need.

    He looks like a friggin skeleton….

    Ciao
    MS

  6. Risk Averse Alert commented on Jun 2

    It seems to me the larger issue re: inflation has been the long-term dis-investment in the physical economy of the U.S.

    This has created an environment wherein widening fluctuations between deflationary and inflationary impacts might be expected.

    Presently, it seems commodities inflation could be peaking. There’s a growing political consensus to contain the market’s incapacity to restrain itself. Beyond typical “inside the box” bashes on government coming from friends of the British Empire, I would take the prospect of some REAL oversight and regulation of commodities markets seriously. Lord knows it’s needed.

    So, it might just be time for the pendulum to swing back to the greater risk of deflation. Those sectors of the stock market that have benefited from commodities inflation might be promptly clobbered.

  7. Paul Jones commented on Jun 2

    To buttress my view that our beloved government isn’t merely wrong but actually is maliciously lying I present Exhibit A from the USA Today:

    “NASA watchdog says press office distorted climate studies”

    http://blogs.usatoday.com/ondeadline/2008/06/nasa-watchdog-s.html

    In a nutshell; some Bush hack in the press office was blocking the numbers from being reported and was using headline manipulation similar to today’s “Manufacturing gains!” headline.

    I call for similar audits at the BEA and other agencies that tell us that inflation of only 2.6% gnawed our nominal growth of 3.5% down to 0.9%.

    Imagine what the real number is! Scary!

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