Bill Gross Criticizes ‘Total Return’ Bond Funds He PopularizedOctober 18, 2022
‘Bond King’ Bill Gross: The Fed may have already reached its optimal interest rateDecember 19, 2022
A version of this article was previously published in Investing.com
By Thomas Monteiro/Investing.com
Nov 12, 2022
- Bill Gross, a.k.a the “bond king,” says the Fed “knows nothing” in an exclusive interview with Investing.com
- The central bank’s inflated balance sheet means a Volcker moment won’t work
- As we enter a new era for the global economy, cash looks more attractive
Legendary investor Bill Gross isn’t pulling any punches. In his latest letter to the public, the superstar fund manager and co-founder of Pacific Investment Management Company (PIMCO) painted a rather challenging picture of the U.S. (and global) economy going forward.
According to Mr. Gross, Jerome Powell has been deploying the same tactics as Paul Volcker in the late 1970s and early 1980s, but without taking into consideration the fact the economy is much more leveraged now. As he explains, if the Fed’s rate hikes stop at 4.5%, we can still see only a ‘mild recession’; however, anything above 5% would lead to a severe global recession.
“Recent events in the U.K., cracks in the Chinese property-based economy, war and a natural gas freeze in Europe, and a super strong dollar accelerating inflation in emerging market economies, point to the conclusion that today’s 2022 global economy in no way resembles Volcker’s in 1979.”
Bill Gross revolutionized the investment world by creating the first investable market for fixed-income securities and made a fortune by beating the market for decades in a row by trading bonds. However, late last year, he turned on the very asset that made him “bond king,” calling U.S. Treasuries “garbage.” Needless to say, he was right, as bonds went on to one of their worst selloffs in history.
In an exclusive interview for Investing.com early this week, the legendary investor was blunt to say cash is the best investment at the moment, as the Fed has “already gone too far.” In his direct style, Mr. Gross also noted that investors must recognize the new era for the global economy may be brewing and invest accordingly.