Go To Cash By Bill Gross
Source: Tyler Durden
http://www.thetradingreport.com/2015/09 ... o-to-cash/
“I don’t like bonds, I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories.”
“When does our credit-based financial system sputter/break down?”
Gross’ answer:
When investable assets pose too much risk for too little return. Not immediately, but at the margin, low/negative yielding credit is exchanged for figurative and sometimes literal gold or cash in a mattress.
When it does, the system delevers as cash at the core, or real assets like gold at the risk exterior, become the more desirable assets.
Central banks can create bank reserves, but banks are not necessarily obliged to lend it if there is too much risk for too little return. The secular fertilization of credit creation may cease to work its wonders at the zero bound, if such conditions persist.
“What should an investor do?”
In this high risk/low return world, the obvious answer is to reduce risk and accept lower than historical returns. But don’t you have to put your money somewhere? Yes, of course, except markets offer little in the way of double digit returns.
Negative returns and principal losses in many asset categories are increasingly possible unless nominal growth rates reach acceptable levels.
I don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories. But those are hard for an individual to buy because wealth has been “financialized”.
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