“This is all ending… ”
Billionaire money manager Bill Gross was once known as America’s “Bond King.” He managed over $270 billion in fixed income assets inside PIMCO’s Total Return Fund.
He just made some eye-opening remarks about the longevity of the stock and bond bull markets…
In his latest “Investment Outlook” essay, Gross notes we’re hitting the limits of worldwide central bank market stimulus. Since the Great Recession began last decade, banks have printed tens of trillions worldwide through their “quantitative easing” (QE) programs.
They’ve used this money to buy inordinate amounts of government bonds across the globe… and this artificial demand has now lowered interest rates below zero in Europe. That means bond buyers now pay money to hold government debt (instead of earning interest as a normal bond environment would allow).
Here’s what Gross said of the situation:
When does our credit-based financial system sputter/break down? When investable assets pose too much risk for too little return. Not immediately, but at the margin, credit and stocks begin to be exchanged for figurative and sometimes literal money in a mattress.
We are approaching that point now as bond yields, credit spreads, and stock prices have brought financial wealth forward to the point of exhaustion. A rational investor must indeed have a sense of an ending…
Here’s his recommendation for the intelligent investor in our present environment:
Investment managers tend to focus on areas where capital gains seem most probable. They fail to consider that mildly levered income, as opposed to capital gains, will likely be the favored risk/reward alternative.
Gross’ advice won’t surprise regular Daily readers. We spill a lot of ink explaining safe investment strategies that dovetail with Gross’ assessment.
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Learn more in our next item…