Tweet
So Bill Gross et all are now official hacks for the Fed.
These folks really just blow with the wind. Pragmatic as ever -"just don't let the party end on my watch"
No criticism at all, incredible. Hey, if "the price of money is the basis of economic prosperity", let's just give it away and we can all sit on the beach - just f...ing incredible
http://www.pimco.com/EN/Insights/Pag...Cellphone.aspx
Commonsensically it seems to me that the more finance-based and highly levered an economy is the lower and lower real yield levels must be in order to prevent a Lehman-like earthquake. If the price of money is the basis for an economy’s prosperity – and it is increasingly so in developed global economies – then central banks must lower the cost of money to maintain that prosperity – and keep it low.
...
The New Neutral = 0–50 basis points real in the U.S. and many lesser developed economies. We should get used to it – and hopefully profit by it.
Investment Conclusions
The profiting by it is the hard part. With “The New Neutral” real and nominal interest rates, savers and investors are effectively being “taxed” in order to benefit debtors. As mentioned in last month’s Investment Outlook, there are ways to fight back, most of which involve emphasizing more attractively priced forms of “carry” than duration, especially at 10-year Treasury yields of 2.50% and below.
These alternative forms of earnings include credit, volatility, yield curve and currency overweights that themselves appear to be artificially priced, but less so. In addition, if “New Neutral” interest rates favor debtors as opposed to savers, then becoming a conservative debtor while structuring a portfolio appears to make common sense. It just has to be done carefully with a mind to future Minsky moments that can’t be conveniently captured in a cellphone, a bottle or even a diversified portfolio of stocks, bonds or alternative assets.
These folks really just blow with the wind. Pragmatic as ever -"just don't let the party end on my watch"
No criticism at all, incredible. Hey, if "the price of money is the basis of economic prosperity", let's just give it away and we can all sit on the beach - just f...ing incredible
http://www.pimco.com/EN/Insights/Pag...Cellphone.aspx
Commonsensically it seems to me that the more finance-based and highly levered an economy is the lower and lower real yield levels must be in order to prevent a Lehman-like earthquake. If the price of money is the basis for an economy’s prosperity – and it is increasingly so in developed global economies – then central banks must lower the cost of money to maintain that prosperity – and keep it low.
...
The New Neutral = 0–50 basis points real in the U.S. and many lesser developed economies. We should get used to it – and hopefully profit by it.
Investment Conclusions
The profiting by it is the hard part. With “The New Neutral” real and nominal interest rates, savers and investors are effectively being “taxed” in order to benefit debtors. As mentioned in last month’s Investment Outlook, there are ways to fight back, most of which involve emphasizing more attractively priced forms of “carry” than duration, especially at 10-year Treasury yields of 2.50% and below.
These alternative forms of earnings include credit, volatility, yield curve and currency overweights that themselves appear to be artificially priced, but less so. In addition, if “New Neutral” interest rates favor debtors as opposed to savers, then becoming a conservative debtor while structuring a portfolio appears to make common sense. It just has to be done carefully with a mind to future Minsky moments that can’t be conveniently captured in a cellphone, a bottle or even a diversified portfolio of stocks, bonds or alternative assets.
Comment