bill gross joins richard russell as new bulls

[jk]

bill gross' latest can be read at:
http://www.pimco.com/LeftNav/Feature...-June+2007.htm


he says that he opened the pimco annual secular forum by placing two glasses in front of the attendees, and saying: "This one’s half-empty, and this one’s half-full. It’s up to us to choose.”

he writes:

We foresaw rising global growth, but said it would be “moderate” due to a lack of aggregate demand. We spoke to a “stable disequilibrium” which referred to good times now, but maybe bad times on the horizon, and emphasized not the stability but the potential downside arising from trade deficit imbalances,U.S debt buildup, and resultant financial flows. Those worries were enough to tilt portfolio constructions towards a more U.S. centric housing led slowdown which we hit right on the money, but they steered us away from a more global orientation where the rest of the world continued to experience 5%+ growth rates and to dominate financial market trends.

Big deal or nuance? Well the fear of disequilibrium led to underweightings in risk assets and premature positions in front-end global yield curves over the past several years, and those positions cost us some basis points.

he goes on to talk of a cyclical slowdown in 2007-2008 based in a still-slowing housing market, but concludes it's time to join the "half-full" camp. he points to global growth of 5% but with the g7 plugging along at 2% or so. this produces a "carry-trade" not just in the yen, but in the currencies of all the developed nations. the opportunities, he says, are in the ldc's currencies, local currency denominated bonds [for fixed income managers like pimco], and ldc equities [he implies].


just a few years ago, when the dow was rising from its 2002 lows, gross became infamous for writing a piece titled "dow 5000." he has definitely been a member of, and spokesman for, the half-empty, bearish camp.


now, within the last week, he and richard russell have both: a. come over from the dark side, or b. drunk the kool-aid. as gross said: "it's up to us to choose."

[grapejelly]

Re: bill gross joins richard russell as new bulls

Gross has been the beneficiary of the long bull market in bonds. How much longer will bonds bull? It appears to me that interest rates have been at a secular bottom since 2003 and are set to rise. He is a genius until that happens, no?

Greenspan's joining PIMCO, capitulation of Russell and Roach, what doest this add up to?

Up to us to choose??? Today it is, but maybe not tomorrow

[Mega]

Re: bill gross joins richard russell as new bulls

Rates going UP?!
Every "Bloomberg type" has been on all week telling me that rates will be going DOWN...So There!

(I do you right and we see a return to High Inflation/ High rates).
Mike

[grapejelly]

Re: bill gross joins richard russell as new bulls

rates are heading up everywhere in the world. Ex US??? How would that work?

The US$ isn't gonna like this (and neither is Mr. Ranger).

[jk]

Re: bill gross joins richard russell as new bulls

Gross has been the beneficiary of the long bull market in bonds. How much longer will bonds bull? It appears to me that interest rates have been at a secular bottom since 2003 and are set to rise. He is a genius until that happens, no?

Greenspan's joining PIMCO, capitulation of Russell and Roach, what doest this add up to?

Up to us to choose??? Today it is, but maybe not tomorrow

gross is a smart guy who has more than benefitted from the bond bull - he has consistantly outperformed his peers until the last few years when his performance has been only mid-range [because of his pessimism].
his column is titled, significantly, 'How We Learned to Stop Worrying (so much) and Love “Da Bomb”' he defines "da bomb" as all the good things happening in the global economy. the title is signifricant since, as he points out, it was the subtitle of the film, dr strangelove. the illustration is a cartoon of slim picken's waving his cowboy hat as he rides an h-bomb [being dropped out of a b-52 in the movie, and setting off a doomsday machine which destroys the whole world]. so it appears that gross is still quite attuned to underlying risk, but [my interpretation] thinks this game is likely to go on a long time and he doesn't want to keep underperforming [for him, which is average performing for the asset class].

[Spartacus]

Re: bill gross joins richard russell as new bulls

IMHO no one at the FED or the current administration cares about the dollar against foreign currencies.

The treasury has to be backed into a corner before it will declare currency valuation intervention and abuse.

They only care about the dollar tangentially, in that with a falling dollar imports will cost more.

And there's the Hudson constituency that believes eventually the dollar is toast because of the need to illegitimately escape the external debt.

rates are heading up everywhere in the world. Ex US??? How would that work?

The US$ isn't gonna like this (and neither is Mr. Ranger).