Has everyone lost their minds? Or is it that Gross has also been brought over to the dark side of "Chopper" Finance as well?
He is looking to buy equities. Where was he 40% ago?
Gross has been saying:
Sell MBS.
Sell High Yield. The sell high yield part is very interesting considering that there has been huge outflows in PIMCO high yield funds.
Buy Treasuries.
Buy Investment Grade.
http://www.bloomberg.com/apps/news?pid=20601087&sid=auysIJRq0Q1I&pos=2
"The sustainability of the U.S. economic recovery by the private sector after government stimulus programs end remains in question, Gross said. Below-average growth may prompt yield spreads to increase on high-yield debt and the Federal Reserve’s plan to complete its mortgage purchase program will hurt returns on those securities, he said.
High-yield, high-risk bonds have returned a record 52 percent this year, including reinvested interest, compared with 19 percent for investment-grade debt and a loss of 2.5 percent for Treasuries, according to Merrill Lynch & Co. index data. Speculative-trade bonds are rated less than BBB- by Standard & Poor’s and below Baa3 by Moody’s Investors Service."
But now he is looking to buy equities as well.
Bill Gross who happens to be the smartest bond guy around believes the US is entering the new normal of very slow economic growth with high unemployment. This is the reality. But the Banana Republic Equity Markets are factoring in 5-7% nominal GDP growth. If this type of growth doesn't happen, then debt deflation, asset destruction,and a forced spiral deleveraging will take place.
But his play on equities leads me to believe that more and more investors are just throwing their hands in the air and hitting the buy button in equity land.
This just further illustrates my theory on the markets in general
http://tradersutra.blogspot.com/2009/09/just-theoryreally.html
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