Bill Gross

[winston]

Fear that several European countries may default on their government debt will continue to put pressure on financial markets, says Pimco managing director Bill Gross.

Greece, Portugal, Spain and Ireland all face heavy debt burdens.

"The magnitude is not the same as the subprime crisis, but to a certain extent, they're similar," Gross told CNBC.

The similarity is that the woes in Europe are making investors question all the assets they have driven upward in price over the last year.

"Global markets for 12 months have been re-levered on the back of government and central bank credit creation," Gross said.

"Think of this as a balloon that's been expanded... Now we're beginning to question the pricing of all risk assets."

Source: Newsmax

[winston]

Sovereign Debt Concerns

Discussing the day's selloff on sovereign debt concerns, with Bill Gross, PIMCO founder & co-CIO.


http://www.cnbc.com/id/15840232?video=1 ... estorPlace

[winston]

Bond fund manager extraordinaire Bill Gross says the U.S. economic rebound will be tepid, thanks to the withdrawal of government support and the weak job market.

The economy grew 5.7 percent in the fourth quarter and could well expand 4 percent in the first half of this year, but then it will fizzle out, Gross says.

"The economy and the asset markets have been reflated by the wallets and checkbooks of government, not the private balance sheet," he told CNBC.

"Now a lot of that has been halted and in some cases withdrawn. The credibility of weak governments – Greece, Portugal, Spain and Ireland – and the sustainability of stronger ones are being questioned," Gross says.

Source: Newsmax

[-dol-]

I thought this view has been drummed into our heads for many months already. So we should not be surprised, right?

[millionairemind]

Investment Outlook
Bill Gross | March 2010

Don't Care
http://www.pimco.com/LeftNav/Featured+M ... t+Care.htm

[millionairemind]

Investment Outlook
Bill Gross | April 2010
Rocking-Horse Winner

http://www.pimco.com/LeftNav/Featured+M ... 010+IO.htm

[LenaHuat]

Last nite, I watched him on CNBC repeat his mantra abt the new normal for equities and bonds. If so, and more so if one thinks that asset inflation is going to be a serious problem, one either sits on a rocking chair grounded on properties and do nothing or re-look at one's asset allocation and shift assets away from stocks and bonds.

[millionairemind]

PIMCO fears UK 'debt trap'
The US bond fund PIMCO has warned that Britain risks a vicious circle of rising debt costs as global investors demand a penalty fee on gilts to protect against inflation.
By Ambrose Evans-Pritchard, International Business Editor
Published: 10:00PM BST 31 Mar 2010

Bill Gross, the fund's chief and emminence grise of bond vigilantes, said the UK was on its list of "must avoid" countries along with Greece and others in eurozone's Club Med.

The flood of British debt is likely to "lead to inflationary conditions and a depreciating currency", lowering the return on bonds. "If that view becomes consensus, then at some point the UK may fail to attain escape velocity from its debt trap," he wrote in his April monthly note.

Mr Gross said the UK is not yet in crisis but gilts are sitting on a "bed of nitroglycerine" and must be handled delicately. Spreads on 10-year gilts have crept up to 14 basis points above those of Spain, itself in some difficulty.

Professor Carmen Reinhart, an expert on sovereign defaults at Maryland University and author of This Time is Different: Eight Centuries of Financial Folly, said Britain's trump card is a debt maturity of over fourteen years, much higher than the US or the big eurozone states. This greatly reduces roll-over risk or the danger of a "sudden death" crisis in the event of a shock.

"What we found in our research is that countries nearing default start to rely on ever shorter debt maturities and issue more bonds in foreign currencies. The UK has done neither," she said.

"Britain may need a scare to force the politicians to act, just like the Canadians in the early 1990s when they started to trade like an emerging market. The lesson in these cases is that the sooner it happens the better. The risk for America is that their status as holder of the world's reserve currency will let them delay," she said.

However, there are risks that Britain will have trouble finding creditors to finance a deficit of 12pc of GDP now that the Bank of England has halted quantitative easing. The Bank has soaked up £200bn of gilts, more than the Treasury's total debt issuance over the last year.

Michael Saunders from Citigroup said the UK has "no credible medium-term path back to fiscal sustainability". Little is being done to confront the "cuckoo in the nest": the 28pc of public spending going to welfare payments. He said inflation may spike to 4pc this year, leaving gilts nakedly exposed.

Spyros Andreopoulos from Morgan Stanley said Britain's long-term debt maturities paradoxically create a "greater temptation to inflate" since it is harder for bond vigilantes to punish the country. He said the risk will rise once the budget deficit comes back under control and there is less new debt to finance, arguably in two to three years.

For now, Greece remains the immediate worry. Last week's deal by Europe's leaders to create a joint IMF-EU support facility has failed to restore confidence, largely because there is no clear trigger and because it does not offer the long-term cheap financing that Greece needs to recover.

Yields on 10-year Greek bonds have risen to 340 basis points over Bunds, leaving investors who took up a €5bn (£4.4bn) issue on Monday with a big capital loss. A €1bn snap auction on Tuesday made matters worse, yielding under €400m. Greece's Public Debt Management Agency said the country needs to raise a further €32bn this year, including €11.6bn by late May.

[winston]

Gross: Interest Rates to Soar Once Obamacare Kicks In
Wednesday, 31 Mar 2010 03:58 PM
By: Julie Crawshaw

Pimco chief investment officer Bill Gross says interest rates are heading higher and healthcare reform will cost us big time.

"No investment vigilante worth their salt or outrageous annual bonus would dare argue that current legislation is a deficit reducer as asserted by Democrats and in fact the Congressional Budget Office," writes Gross in a note to investors.

And, as a November IMF staff position note pointed out, "high fiscal deficits and higher outstanding debt lead to higher real interest rates and ultimately higher inflation, both trends which are bond market unfriendly," Gross notes.

In addition to the 10 percent of GDP deficits and a growing stock of outstanding debt, U.S. investors must be concerned with future unfunded entitlement commitments, "which portfolio managers almost always neglect, viewing them as so far off in the future that they don’t matter," Gross says.

"Should it concern an investor in 30-year Treasuries that the Congressional Budget Office estimates that the present value of unfunded future social insurance expenditures (Social Security and Medicare primarily) was $46 trillion as of 2009, a sum four times its current outstanding debt?" Gross asks.

"Of course it should, and that may be a primary reason" why 30-year bonds yield about 4.7 percent whereas 2-year debt with the same guarantee yields about 1 percent, he says.

Brian Edmonds, head of interest rates at Cantor Fitzgerald & Co., said the Treasury market is having a delayed reaction to the $940 billion healthcare overhaul bill.

"The idea is that idea that another big spending program means more borrowing by the U.S. Treasury, that we're going to continue to see massive amounts of supply in Treasury-land," Edmonds told The Wall Street Journal.

http://moneynews.com/StreetTalk/Gross-I ... /id/354402

[-dol-]

If so, then what is Goldman Sachs trying to do recommending junk bonds?

‘Unloved’ Junk Debt May Be Best Bond Investment: Credit Markets

http://www.bloomberg.com/apps/news?pid= ... Lf4Q&pos=2