Bill Gross speaks frankly about financial markets following his recent retirement from Pimco, the world’s largest fixed-income fund, which he founded.
So what is Bill Gross, the bond king now doing with his fortune?
Bill Gross speaks frankly in his latest interview since retirement saying that he still has treasury futures and also wishes he had German bund in his portfolio.
“Bill Gross speaks frankly about financial markets following his recent retirement from Pimco, the world’s largest fixed-income fund, which he founded”
Bill Gross speaks frankly about the Fed’s latest round of asset purchases
Known as quantitative easing QE, which he refers to as “baby QE” because “they are buying bills as opposed to 5s and 10s theoretically to widen the yield-cure a little bit” he said.
Baby QE is all about margins for banks and mortgage rates, according to Bill Gross.
Why is the yield curve so important?
“Capitalism itself depends on caring, that is why flattening the yield curve itself is so dangerous because nobody is prepared to take risk” said Bill Gross. So when the 2s and 10s year treasuries yield curve flattens there is no reward for investors to tie up money long term because the yields are so low. In other words, in a flattening yield curve environment, investors will not be extending maturity and duration to capture yield because there is no yield to capture.
“Capitalism itself depends on caring, that is why flattening the yield curve itself is so dangerous because nobody is prepared to take risk”
Bill Gross speaks frankly about baby QE too
“Baby QE won’t push up all stocks” he added, “It will help to salvage a day or two of repo madness”.
The brief turmoil in the US repo market was triggered by a lack of liquidity, or low demand for securities, which sent interest-rates briefly sky-high. Put simply, the banks were not willing to lend to each other, which could be yet another sign that all is not well in the greatest economy ever.
Bill Gross speaks frankly about the opportunities in the repo market
“Interest-rates can and did go to double digits. I am in there for that,” he said.
What about stocks? Bill Gross speaks frankly about stocks
“I like high dividend paying stocks such as Invesco, which is an investment management company it trades at a 6 PE and has a 7.5 yield,” he said. “I like it from the standpoint of cheapness and dividend” added Bill Gross.
Bill Gross also invested his money in Allergan, which manufactures eye lenses.
“I am making some good money in Allergan” said Bill Gross.
“We are going to need another trillion dollars to do the same magic”
– Bill Gross
Bill Gross speaks frankly about the macro situation too
Fiscal stimulus and tax cuts have already played out, according to Bill Gross. “We are going to need another trillion dollars to do the same magic” he added.
“Interest rate play has gone for most of the world because 17 trillion dollars of bonds are negative-yielding” and he added “what should lie ahead is Fiscal stimulus.
Most of the world needs fiscal stimulus, Germany needs it but they are so tight and so stingy that they cannot spend money on their economy they can only lower interest rates, he said.
He doesn’t think Trump will be re-elected and he thinks Trump’s impeachment will lower yields and slow the economy. He believes Warren will be the next female US
President, she will do more Fiscal spending. “If Warren gets in we will do another trillion” he said in his interview.