Bill Gross
Bill Gross
William Hunt "Bill" Grossis an American financial manager and author. He co-founded Pacific Investment Management. Gross also ran PIMCO's $270.0 billion Total Return Fund. Gross left Pimco to join Janus on September 26, 2014...
NationalityAmerican
ProfessionEntrepreneur
Date of Birth13 April 1944
CountryUnited States of America
chaotic cheap either financial foreign higher lower pay perhaps rising spending standard
Either way, ... we pay the price: higher import costs, a cutback in spending on cheap foreign goods, rising inflation, perhaps chaotic financial markets, a lower standard of living.
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So, the lower inflation goes and the more and more investors believe that inflation will stay low, the better it is for the bond market.
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At some point down the road, in a dynamic economy such as the U.S., we should be returning to a more normal shape. That means ultimately short rates and the front end of the curve will trade at lower yields than long rates.
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We're beginning to see some signs that the economy is starting to weaken in the second half of 1998, ... We're going to see 1 to 2 percent growth. If we see those numbers, then we can move down even lower below 5 1/2 percent on the long bond.
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This works because merchants have a high cost of customer acquisition, and we lower it, ... We bring them customers with their wallets open.
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If the economy slows down, if housing moves back down, then at some point late in 2006 the Fed starts to lower rates. That's why a 10-year note yield at 4.55 percent is a decent value as opposed to overvalued.
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If Fed Funds were expected to rise in the future, the curve would be positive with intermediate and long bonds requiring higher yields as a cushion against accelerating short rates. If the Fed were expected to lower rates, a flatter, even inverted curve might result. It's not that this academic theory has been dislodged in recent years but it may have been asked to take a seat next to the increasingly important variable of global financial flows. These flows, no doubt, rely critically on the willingness of foreign investors to hold U.S. assets in the face of potential currency and asset price depreciation.
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I'm sure it's going to take us a year or two, but it's in the works.
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Inflation and deflation in this levered world coexist nearly side-by-side,
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Stocks historically return more than almost all other alternative investments but only when priced right when the race begins, ... If you start from day one with P/Es too high or, importantly, dividends too low, you will not obtain equity returns in excess of bonds.
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That is not to say that long government bonds won't go up in price if the 'system' suffers some elimination, slower growth, or to be frank, a recession in 2006,
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They will cut until they reach the point that the average consumer finally cries 'uncle' and starts to take on risk.
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It's not a great time for high yield.
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The Fed knows that the economy is in terrible shape and that they must bring down short-term rates to the level of inflation. If inflation keeps coming down, the Fed, to a certain extent, has to chase inflation.