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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerPIMCO chief investment officer Bill Gross said Friday finance minister and central bank action worldwide should soon loosen-up credit and bond markets.
"We're talking weeks here," Gross said in an interview with Bloomberg News.
Gross' Total Return Fund has yielded 4.4% annually over the past five years, besting 99% of its peers in the government / corporate bond category, as of October 16, according to data compiled by Bloomberg News. California-based PIMCO has $840 billion under management.
Gross: more rate cuts needed
Gross has also called on the U.S. Federal Reserve to lower its benchmark interest rate to 1% from the current 1.5%, arguing that asset deflation has taken hold and that the threat of headline inflation is gone, Reuters reported.
The world major economies are using a combination of fiscal and monetary policy actions to end a liquidity crisis that threatens to severely damage economies worldwide by constraining commercial operations.
Economist David H. Wang told BloggingStocks Friday he agrees with Gross' call for further interest rate cuts from the Fed, to a degree, and on the resumption of bank-to-bank and credit market confidence, but is less certain about the prospects for economic growth.
"I would favor Fed interest rate cuts in two, 25-basis-point increments, but I think we're going to need more fiscal policy stimulus to revitalize investor confidence," Wang said.
"We are seeing institutions re-approach the bond market, and bank-to-bank confidence is building, but keep in mind this progress, when complete, will only get us back to roughly normalized credit flows, but with higher interest rates. It does not mean conditions exist for the economy to grow," Wang said. "We're going to need something on the demand side to counteract the contraction forces on the current economy. Most likely, more fiscal stimulus will be needed, certainly in the United States, and probably in the European Union as well."
Economic Analysis: This week [the week of October 13] was characterized by incremental steps forward for the credit markets - - no minor achievement given where the global financial system appeared to be headed, two weeks ago. That said, as economist Wang underscored, rising credit market confidence does not nearly equate with economic growth: almost all fundamentals continue to head in the wrong direction - - something policy makers will have to address in the weeks and months ahead.
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Reader Comments (Page 1 of 1)
10-17-2008 @ 6:52PM
winslow said...
I doubt if anyone in the fed is listening......business as usual. But, I know there can be salvation because Paulson finally stated he was wrong in his reactions. This is probalby the first time anyone associated with Bush has stated the obvious. There is hope we will get out of this and learn something.
12-05-2008 @ 7:10PM
Amortz said...
Hmm... Just weeks away. From October. Yep. Just around the corner. Maybe, just maybe...they are and were wrong? Some got it right: www.endtimesroundtable.com economics forums have been hitting it dead on for months.