The Last Vigilante
Bill Gross's monthly Investment Outlook is always informative and thoughtful; this month's issue "The Last Vigilante" is no exception. It can be summarized as follows:
1) In the past twenty years United states has been transforming itself from a manufacturing economy to a service economy and then to a finance-based economy, which "depends on more and more low cost money in order to thrive."
2) Total credit market debt is at all time high compared to GDP, now at 299% compared to 270% during 1930s and 140% at the start of 1980s. Bill predicts that "if debt stops growing at the same rate ... our economy will slow down."
3) For our finance-based economy, low rates (real Fed rate is below zero for now) is the real productivity, as real short rates starts to "climb from negative to only slightly positive," the lack of higher productivity is going to hurt the economy.
4) Bill further suspects that the reflationary attempts employed by Greenspan may not lead to "succcessful reflation in terms of economic growth." In the longer term, "Treasury interest rates may then ultimately fall instead of rise as reflation fails and debt deflation takes hold."
One of my favorite personal finance columnist Whitney Tilson provided this good summary of various tools to short the market. Read
SmartMoney threw out two articles, Is a Correction Brewing? and A March Massacre?, both warning that a market correction is in the making. The first article also features opinions from a number of top market insiders. Bill Gross is most pessimistic, saying "[Stocks] are relatively ... Read
I have become a loyal reader of Bill Gross's monthly Investment Outlook. This January issue is somewhat mind-boggling. It mainly talked about four observations of the current fixed income market and is best concluded in this paragraph: "That history points towards an environment of lower ... Read
Whitney Tilson explained why he thinks it is a scary time for stocks. His main worries: - Benefits from low interest rates, tax cuts and increased government spending are almost over - Consumer debt is rising over time and is a time bomb now ... Read
