Investment: Bonds are ‘garbage’ according to Bill Gross – and stocks could follow | Personal Finances | Finance


Bill Gross founded his investment management company PIMCO in 1971, which has grown steadily. He became well-known as a bond fund manager, while also managing the organization’s $ 270 billion total return fund – once the largest bond fund in the world. Prior to his departure from PIMCO in 2014, it is claimed that Mr. Gross controlled more bond money than anyone in the world. He also played a key role in advising the Treasury during the 2008 global financial crisis, focusing on subprime mortgage bonds. Bonds are generally referred to as fixed income or fixed interest investments. When someone invests in it, they basically lose their money to the benefit of the government or a business that needs to raise funds.

After investing for a specified period, individuals can expect to receive their initial amount. They are often seen as less risky and help individuals diversify their portfolios.

What appears to be Mr Gross’ turn-around on the asset class, his claim to fame, has shocked some. However, he went into the details of his reasoning, writing a lengthy article on the matter on his personal website.

He wrote: “Cash has been a trash for a long time, but now there are new contenders for the investment trash. Intermediate to long bond funds are certainly in this trash. “

Mr Gross has voiced his opinion on interest rates, saying that at 1.25% for the 10-year Treasury they have “nowhere to go but up”. He sees 10-year Treasury yields rise to around 2% over the next 12 months.

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The investment expert added: “How fast is the real question, because even if they increase by 10 basis points per year over the next decade, a bond investor could still break even with a fund? indexed bond. But they’ll go up faster than that and probably a lot faster.

“I’m thinking of two percent 10-year Treasuries over the next 12 months. Thanks to the benefit of my aging mathematical gymnastics, this equates to a price loss of 4-5% and a negative total return of 2.5-3%.

But that was not the end of Mr Gross’ predictions for the future of investing, and he also expressed great skepticism for stocks, which could follow closely behind, leaving individuals with little wiggle room.

He added: “Profit growth had better be double-digit or else they could join the garbage truck as well.”

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Mr Gross also referred to the current crisis in Afghanistan, which has seen US and British troops withdraw from the region after 20 years of military presence. The fallout, he said, could impact investors.

Another problem he cited was the problem and the “relentless push” of global warming, but he explained that “few investors seem to care unless there is a new IPO. solar on the first day “.

For those appalled at the negative image Mr. Gross has potentially painted of the future, what action should be taken next? Mr Gross indicated what he thought might work best next, joking that he had “expressed another opinion”.

He, seemingly ironic, referred to two recent events that captured the interest of many around the world, making headlines for huge sums of money.

The first was “Salvatore Garau’s NFT”, where an artist reportedly sold an “invisible sculpture” for $ 18,000. The work of the Italian artist, entitled ‘Io Sono’ or ‘I Am’ does not exist, it is rather a space “full of energy”.

Mr. Gross also referred to the “Honus Wagner baseball card,” a sports card that depicts the famous American baseball shortstop who played from 1897 to 1917, primarily for the Pittsburgh Pirates.

One recently sold for $ 6.606 million, breaking the record for the most expensive sports card of all time. ESPN estimates that there are around 60 of these cards left.

Mr Gross’s latest post is not the first time he has commented on the long-standing bond bull market. In fact, individuals need only look back to March, when the expert said he expected yields to climb to 3%.

Indeed, in 2018 he also discussed the idea of ​​government bonds, calling them a “bear market” after the Treasury yields soared.

Many have turned to Mr. Gross for advice over the years as he solidifies his pioneering position in fixed income investing. Throughout his career, he has received numerous awards for the management of fixed income securities.

Mr. Gross announced his retirement from Janus Henderson Investors and active fund management in February 2019. He intended to devote more time to managing his personal assets, alongside his large private charitable foundation.

The William, Jeff and Jennifer Gross Family Foundation is worth $ 390 million in assets and annually donates over 21 million yen to nonprofit organizations involved in humanitarian, healthcare, and social causes. education.


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