Bill Gross's newletter "Be Careful"

[clifp]

Bill Gross's newsletter aren't typically as folksy as Warren Buffett's, but this one with pictures of pigs in stockades is pretty close.

Of particular interest was his description of how important credit is in determining asset prices.

I find it fascinating the number of ways that investors approach the “value” of securities and other investments such as commercial real estate or homes. Many of them are legitimate and form a solid foundation in academic research or even common sense. “Natural” interest rates, P/E ratios, cap rates, risk and liquidity premiums, and even real estate’s “location, location, location” are ways to fundamentally price an asset. Add to that the emotional influence of human nature and you have a pretty good idea as to why prices go up and down; not necessarily a pretty good idea as to when they will go up and down, but at least the why part is partially visible.
But lost in this rather complex maze of why is the function of credit and credit expansion in a modern, financial-based economy that it dominates. Asset prices are dependent on credit expansion or in some cases credit contraction, and as credit goes, so go the markets, one might legitimately say, and I do most emphatically say that!

Emphasis his. FYI, PIMCO slightly increased their holdings of government bonds this year.

 

[aja8888]

That pig in the stockade should be Bill Gross after some of the calls he made when he was sinking the big bond fund.

I read today he is being headed into retirement and the younger bucks will be in the front lines.

 

[haha]

That pig in the stockade should be Bill Gross after some of the calls he made when he was sinking the big bond fund.

I read today he is being headed into retirement and the younger bucks will be in the front lines.

It was pretty easy to get hurt in late spring and early summer. There was so little coupon to buffer the capital loss when Bernanke created taper-gate.

Ha

 

[aja8888]

It was pretty easy to get hurt in late spring and early summer. There was so little coupon to buffer the capital loss when Bernanke created taper-gate.

Ha

I guess everybody got caught with their pants down last Spring when bond yields rose like the space shuttle and the NAV's fell off the cliff. Gross has done a great job over the 40+ years he is there. At 69 years old, he needs a break, so to say.

 

[Bert Cooper]

I guess everybody got caught with their pants down last Spring when bond yields rose like the space shuttle and the NAV's fell off the cliff. Gross has done a great job over the 40+ years he is there. At 69 years old, he needs a break, so to say.

How many of us are going to change our PIMCO allocation in the near term?

 

[gcgang]

Thanks for the link to Gross' commentary.

I tend to agree with the main point, "be careful", because credit expansion is getting harder to come by.

To paraphrase Jimmy Cliff,
As sure as the sun will shine, I don't want to lose all of what's mine, because
The harder they come, the harder they fall, one and all.