The Guardian dug out a weird picture of Bill Gross channeling Top Gun era Tom Cruise for its recent interview with the Pimco founder. Generally the legendary bond investor rocks a Herman Munster’s Brainy Brother look.
The interview itself is more in keeping with the usual Gross line, however, albeit it modified slightly to say the UK is doomed in the near-term, but it’s the least worst of all possible options:
“The UK will try to get out of 16 tonnes of debt by reflation [low rates and high inflation] or devaluation,” Gross says. “The pound is going down and they will have to keep policy rates under 1% for a long, long time because of the housing market, and because many mortgages have a floating rate.”
All usual Gross stuff, and fine as so far as it goes. I think the Guardian should have stuck to the direct quotes, however, because I have no idea how the writer got this end of the stick:
The prospects of low interest rates and inflation, as well as a potential fall in sterling, could lose bond investors a lot of money. These scenarios could be considered a “default” in Gross’s view – hence his comparison of Britain’s debt to volatile nitroglycerine.
Wrong, and not wrong – the almost not wrong bit is if you’re an overseas investor and sterling falls you’ll obviously lose money, though I think even that trade is running out of steam.
But how low inflation would hurt bond investors is anyone’s guess! Answers on a postcard to The Guardian please.
(Source: The Guardian via Tony)
{ 3 comments… read them below or add one }
It’s the guardian so I think its safe to presume that’s just badly written. He means
Low interest rates, as well as inflation
Not
Low interest rates and low inflation
@Lemondy – Ah yes, that must be it! I can’t complain, I should have read harder. Incidentally, excuse the fuss about your comment being held to be moderated there, I don’t know why that happened since you’re not a first time poster… unless it’s because you’re using different details (or maybe it works on cookies?)
I posted that from my phone, and I didn’t capitalize my name, either of those could have done it I suppose