Bill Gross is at it again

Discussion in 'Wall St. News' started by Trend Fader, Sep 6, 2005.

  1. This is interesting, a must read.
  2. OldStyle


    Could someone please post this article. Would like to read, but will not sign up for CBS Marketwatch...I get enuf junk email, don't need my web address out there.

    Thank you.
  3. Babak


    Pimco's Gross: End of bubble is nigh
    Go short and avoid real estate, equities, corporates
    By Rex Nutting, MarketWatch
    Last Update: 7:06 PM ET Sept. 6, 2005
    E-mail it | Print | Alert | Reprint |

    WASHINGTON (MarketWatch) - Investors should prepare themselves now for the end of the U.S. housing bubble by avoiding assets like equities, real estate, corporate debt and junk bonds, said Bill Gross, managing director of Pacific Investment Management Co.

    In his monthly investment outlook, Gross advised investors to "cut the fat" from their portfolios.

    Gross, a well-regarded bond bull, said the housing bubble is likely to either stop inflating, deflate or pop within the next few months, leading to a slowdown in economic growth. Read his commentary.

    Pimco is the largest bond fund manager in the United States, with $493.3 billion in assets under management.

    If the bubble ends, investors must prepare for the "debt liquidation" that Federal Reserve Chairman Alan Greenspan warned about 10 days ago, Gross wrote. See full story on Greenspan's warning.

    "That means a focus on high-quality investments with anticipation for an eventual Fed easing at some point in 2006," he said.

    Gross recommended a "bullish orientation towards the front-end of the curve... coupled with an avoidance of anything that carries those low-risk premiums that Greenspan finally diagnosed."

    In other words, buy short-term securities that have the most to gain from a reversal in the Fed's policy of measured increases in interest rates.

    "That is not to say that long government bonds won't go up in price if the 'system' suffers some elimination, slower growth, or to be frank, a recession in 2006," Gross wrote. "It's just to acknowledge that the better duration-weighted paper lies at the front-end of the curve, especially now that it provides similar yields to longer maturities."

    Gross said he wrote his commentary before Hurricane Katrina hit, suggesting that the storm only "adds to the potential for 'caution.'"