Maybe Bill didn't read this or this five years ago, but he finally came around! Hah!
PIMCO falcons are now turning and turning in the widening gyre with the following assumption: All financial assets are artificially priced if only because the policy rate at the center is artificially low. Historical models of fed funds and other global overnight yields suggest as much as a 2% artificially low yield, even when U.S. tapering is concluded. Importantly, however, these artificial pricings do not lead to the conclusion of current asset“mis”-pricings. As long as artificially low policy rates persist, then artificially high-priced risk assets are not necessarily mispriced. Low returning, yes, but mispriced? Not necessarily.
Now I've critiqued Bill Gross and El-Erian from Pimco since the March 9, 2009 BOTTOM in stocks, while they warned us continually to stay out of stocks...
All the while making up nonsense charts that will support the drivel what they say!
Tuesday, January 26, 2010There you go again!! Bill Gross is going willy nilly with his telestrator. Here's his latest graph "proving" that the world is going to hell.
Their conclusions are eerily parallel to events of the past 12 months and suggest that PIMCO’s New Normal may as well be described as the “time-tested historical reliable.” These examples tend to confirm that banking crises are followed by a deleveraging of the private sector accompanied by a substitution and escalation of government debt, which in turn slows economic growth and (PIMCO’s thesis) lowers returns on investment and financial assets. The most vulnerable countries in 2010 are shown in PIMCO’s chart “The Ring of Fire.” These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years’ time, which would slow GDP by 1% or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth.
That's Bill Gross and his Johnny Cash "Ring of Fire chart" So Billy is staying in cash! And he wants you too.
Why doesn't he then, go in stocks? Oh that's right. He says stocks will make just 5% a year!
And leave the telestrator for football.