Salient to Investors:

Bill Gross at Pimco said:

  • The unprecedented cash added to the financial system by central banks is raising the risk of a slide in global asset prices.
  • Global economies and their artificially priced markets are increasingly at risk, but the unwinding may occur gradually.”
  • The Fed, BoJ, ECB and BoE are setting the example for global markets, basically telling investors that they have no alternative than to invest in riskier assets or to lever high-quality assets.
  • Investors are all playing the same dangerous game that depends on a near perpetual policy of cheap financing and artificially low interest rates in a desperate gamble to promote growth.
  • Pimco is focused on shorter-maturity Treasuries, mortgage and corporate debt that will benefit by the Fed keeping its target rate for overnight loans near zero for several years.
  • Monetary and fiscal policies have not produced the real growth that markets are priced for, so investors at the margin will begin to prefer the comforts of a less risk-oriented migration.
  • Expect constant policy rates until at least 2016 in the US.
  • Front-end load portfolios and don’t fight central banks, but be afraid.

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