Influential bond investor Bill Gross of Janus Henderson Investors Gross, with $2.1 billion of assets under management said in early October that “financial markets are artificially compressed and capitalism is distorted because of the U.S. Federal Reserve’s loose monetary policy.”
“Fed’s loose monetary policy had resulted in investors chasing yield and thus producing tight corporate spreads everywhere around the globe” said Gross.
“Fed’s loose monetary policy had resulted in investors chasing yield and thus producing tight corporate spreads everywhere around the globe”
“Even China and South Korea – perfect examples of the risk trade – are at very narrow (corporate spread) levels. There is no real advantage in the global marketplace. Everything is so tight, it is hard to pick a winner from a group that is fake” added Gross.
Gross is warning the Fed chair not to rely on historic models during a period of unprecedented monetary easing.
“The (then) Fed Chair Janet Yellen and other global policymakers should not rely on historical models such as the Taylor Rule and the Phillips curve “in an era of extraordinary monetary policy,” said Gross.
Economists John Taylor and A.W. Phillips devised models for guiding interest-rate policy based, respectively, on inflation and the unemployment rate.
But those models disregard the importance of private credit in the economy, according to Gross.
“Everything is so tight, it is hard to pick a winner from a group that is fake”