Bond Guru Warns: Day Of Reckoning At Hand

[jct74]

https://www.youtube.com/watch?v=OnsQTsN-ohA

Legendary bond billionaire Bill Gross has shifted from bullish to bearish on bonds, warning that the days of central bank dominance are nearly over. Is the financial day of reckoning coming faster than we think?

[Zippyjuan]

That bond guru- Bill Goss- says that he still sees it as a ways into the future and lists some factors to look for- he is not currently shorting anything: http://www.bloomberg.com/news/articl...es-of-instinct

Gross cited a number of scenarios that may prompt him to short credit, including a slowdown in China that would spill over into financial markets, Britain leaving the European Union, an escalation of problems in Greece or Brazil. Another such scenario is if the U.S. Federal Reserve raises interest rates faster than markets can handle, Gross said.

As far as a potential timeline:

The U.S. Fed Funds target rate is between 0.25 percent and 0.5 percent. Eventually, central bankers will have to raise rates to reward individual savers, insurance companies and other investors who depend on fixed-income returns, or the economy and markets will suffer, according to Gross.

The Fed will boost the rate in June and should continue a gradual path of increases, Gross said. Since last week when the Fed released minutes of an April meeting indicating the economy has strengthened enough for a rate increase, the probability of a hike at the June 15 Federal Open Market Committee meeting has climbed to 34 percent, according to futures information compiled by Bloomberg.

“They should move gradually, there is no significant inflation,” Gross said during an interview taped before his appearance at a fixed-income seminar sponsored by Bloomberg. “The gradual pace, which has been on their plate for years now, is really the first requirement. But if it’s too gradual, then ultimately 5, 10, 15 years down the road, savings investment and the economy itself suffer.”