Last quote by Bill Gross
Bill Gross quotes
We shall see whether Republican/Trumpian orthodoxy can stimulate an economy that in some ways is at full capacity already. To do so would require a significant advance in investment spending which up until now has taken a backseat to corporate stock buybacks and merger/acquisition related uses of cash flow. I, for one, am skeptical of the 3 and more confident of the 2.
But longer term, investors must consider the negatives of Trump's anti-globalization ideas which may restrict trade and negatively affect corporate profits. In addition, the strong dollar weighs heavily on globalized corporations, especially tech stocks.
Begin to emphasize 'fiscal' as opposed to 'monetary' policy, but never mention Keynes or significant increases in government deficit spending. Use the buzzwords of 'infrastructure' spending and 'lower taxes.' Everyone wants those potholes fixed, don't they? Everyone wants lower taxes too!
We're stuck in this 0 to 2 percent rut and it's not good for financial assets, which have been overpriced for 5 to 6 years.
I do think that if Trump wins, it's a dollar negative for developed countries. It's equity negative because of the potential volatility. It's bond market negative because of the spending and the tax reductions, in terms of potential and higher inflation.
He's a bigger spender than Clinton, at least in terms of his tax cuts and potential policies. He's attacked the Fed over the past few months and that's not necessarily a positive in terms of independence for the Fed and the potential for inflation going forward.
Our argument is that NIMs (net interest margins) for banks, and the solvency of insurance companies and pension funds with long dated and underfunded liabilities, have been negatively affected and that ultimately, the continuation of current monetary policies will lead to capital destruction as opposed to capital creation.
A commonsensical observation made by yours truly and increasing numbers of economists, Fed members, and corporate CEOs (Jamie Dimon amongst them) would be that low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth.
At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives.
With Yellen, there is no right or left hand – no 'on the one hand but then on the other' – there are only decades of old orthodoxy that follows the tarnished golden rule of lowering interest rates to elevate asset prices, which in turn could (should) trickle down to the real economy.
Capitalism, almost commonsensically, cannot function well at the zero bound or with a minus sign as a yield.
All have mastered the art of market manipulation and no - that's not an unkind accusation - it's one in fact that Ms. Yellen and other central bankers would plead guilty to over a cocktail at Jackson Hole or any other get together of Ph.D. economists who have lost their way.
The Fed, with their focus on low interest rates, is distorting the savings function, not only in the United States but on a global basis, and savings of course is connected to investment. Ultimately I think that's what reduces real economic growth going forward and they don't realize that.
If we see fiscal stimulation in Japan China and ultimately the U.S. after the election, I think we should be investing in real assets as opposed to financial assets.
Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories. But those are hard for an individual to buy because wealth has been 'financialized.
Banks, insurance companies, pension funds and Mom and Pop on Main Street are stripped of their ability to pay for future debts and retirement benefits. Central banks seem oblivious to this dark side of low interest rates. If maintained for too long, the real economy itself is affected as expected income fails to materialize and investment spending stagnates.
Negative returns and principal losses in many asset categories are increasingly possible unless nominal growth rates reach acceptable levels.
Ultimately in terms of real economic growth, an economy needs certainly a positive interest rate and maybe even a close to positive real interest rate in order to function normally.
It is time to worry about the return of your money as opposed to the return on your money.
Until governments can spend money and replace the animal spirits lacking in the private sector, then the Monopoly board and meager credit growth shrinks as a future deflationary weapon.
I knew I didn't have much to gain except for my self respect. I thought I was treated unfairly on the way out from Pimco: They fired me without really giving a reason for it. There was a small coup of individuals that threatened to resign if I didn't.
France ... or Italy might suddenly decide their own domestic internal policies should be favored versus that of a larger EU family.
It's like first-grade math. Here's a non-wonkish statement: When money yields nothing, then it will return nothing. So, when bonds have a zero percent interest rate, or negative interest rate, then there's nothing to gain from owning them.