Bill Gtross Predicts Low Inflation

[haha]

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2005/IO+May-June+2005.htm

He says inflation will peak around 3%, and fall toward 1% for the remainder of the decade. He points to the cost competition in China and India in particular as reasons to expect this.

As a result, he predicts 10 year treasuries will settle between 3 and 4.5% in the intermediate term.

I find this very hard to believe; but Gross is a big expert and I am not. I suppose it may be true that manufactured goods will stay cheap, but there are many other things-insurance, housing, medical care, education- that keep going up and up. And not at any measly 3% pa either.

 

[wildcat]

Strange. Last time I read (not too long ago) he reco'd TIPS. Change of heart or am I missing something?

 

[cute fuzzy bunny]

Bill liked TIPS before his rampage on CPI, when money markets were paying sub 1% rates, and the tips yield was higher than it is today.

Bills made a lot of predictions that havent come true (yet) like the dow dropping to 5000. He's also made a hell of a lot of money in bonds and cash instruments, so I'm all ears to him when he's not talking about equities.

 

[Michael]

He points to the cost competition in China and India in particular as reasons to expect this.

That only works for imports such as clothes and televisions. Things that you have to buy here by law such as meds are going up much faster.