Courtesy of Mish.
In an Bloomberg Television interview Bill Gross of Janus Capital spoke with Bloomberg Television’s Trish Regan about the outlook for Federal Reserve policy, the U.S. economy and his objectives at Janus Capital.
Key Quotes
- “Not even thin gruel is being offered to our modern-day Oliver Twist investors. You have to pay to come to the dinner table and then sit there staring at an empty plate.”
- “The interest rate can’t be raised substantially even over the next two to three years.”
- “The US has escaped the liquidity trap that euroland and Japan are in. But, not necessarily for all time.”
- “[Low interest rates] keeps zombie corporations alive because they can borrow at 3 and 4 percent, as opposed to the 8 or 9 percent. It destroys business models. It’s destroying the pension industry and in the insurance industry.”
- “ultimately, [low interest rates] destroy the capitalistic model at the margin. Instead of investing in the real economy, [corporations] can now simply borrow at close to 0 percent and buy their own stocks, which yield 2 or 3 percent on a dividend basis and provide a return of 6 or 7 percent on an earnings to price ratio basis.”
Transcript
TRISH REGAN: Well, fresh off the presses, famed bond investor Bill Gross’ monthly investment outlook, where he says the reality of today is that — and I quote, “Not even thin gruel is being offered to our modern-day Oliver Twist investors. You have to pay to come to the dinner table and then sit there staring at an empty plate.”
In other words, you’re paying Germany, for example, to hold your money right now. Well, what does this mean for the health of the investing world? What does it mean for the Fed? What does it mean for pension plans? What does it mean for you?
BILL GROSS: Thank you, Trish.
REGAN: If you can work Dickens into an investment letter, along with a few references to the Westminster Dog Show, my hat goes off to you.
GROSS: Here’s another one. You know, back in the Depression, in the 1930s, humorous Will Rogers said that he wasn’t so much concerned about the return on his money, but the return of his money. And in today’s financial markets, we’re, as you mentioned, $2 trillion of euroland paper trades at negative yields, some as much as minus 75 basis points, I think Will Rogers would have to be concerned about both.
A negative yield assures the investor that not only is the return on his money or her money unsatisfactory, but the return of her money will be left (INAUDIBLE) paid.
REGAN: You know, it’s pretty crazy. And you’ve got investors, Bill, out there that are getting somewhat desperate, right, for yield, because, as you rightly point out, there’s just none out there….
