Posted on 04/08/2011 5:58:54 AM PDT by Hojczyk
Bill Gross, founder and co-chief investment officer of Pimco, the world’s largest mutual fund, made news last month when he dumped all U.S. Treasurys from the $1 trillion fund he operates. I spoke with him by phone yesterday afternoon. He had a solemn warning: The United States has a year or two to change course or face a debt crisis akin to what Greece, Portugal and Ireland have experienced.
He describes bond traders as “vigilant but not vigilantees,” meaning they are cautious and on the outlook for signs that inflation (“the enemy of bonds”) will rear its head. He explained that he got out of Treasurys because the return was too small relative to the huge risk on the horizon. Moreover, the Federal Reserve, he says, has masked the problem because “the right hand is buying from the left,” referring to the Fed’s controversial move in November to engage in huge buying of U.S. debt (“quantitative easing”). Gross says, “Mortgage rates would have been 1 percent higher if the Fed hadn’t done what it did.” (In other words, it is getting increasingly hard to lure purchasers of U.S. debt so long as a massive debt goes unaddressed.)
He doesn’t think much of the Fed’s inflation model, which doesn’t account for increasing demand for commodities from emerging countries. He thinks it is “definitely possible” we will have some form of stagflation, “3 percent or 2 percent or 4 percent inflation and low growth.”
(Excerpt) Read more at washingtonpost.com ...
Mr. Gross is one smart cat...and an Obama voter, too.
If the smartest bond guy on the planet sells all of his treasuries, best to heed that move and his words.
God help America, please!
bttt
-——3 percent or 2 percent or 4 percent inflation and low growth.”——
That will not get the job done. The inflation rate must rise to 7% and stay at that level for 3 or 4 years to have an adequate impact on the federal debt. After the 4th year it might moderate to say 4% for eternity
” Mr. Gross is one smart cat...and an Obama voter, too.
If the smartest bond guy on the planet sells all of his treasuries, best to heed that move and his words.”
smart and Obama voter are mutually exclusive.
Dude sounds smart, but he’s playin y’all like a cheap fiddle.
If he say “a year or two” what he wants is for everybody to go on for OK lets split the difference and say 1 1/2 years doing what they’re doing.
And he keeps buying and selling and cashing out for as long as he can till it collapses.
When he says “a year or two”, then cut that in half. He’s telling you to your face that we have a year or a bit more.
Tops.
So, it would seem. But unlike Mr. Obama, Mr. Gross can add 1 + 1 and get 2!
“The United States has a year or two to change course or face a debt crisis akin to what Greece, Portugal and Ireland have experienced.”
You are so right.
Only the hand of God can help us now.
Oremus(Latin for “Let us pray”).
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