Savvy Money Favors “Real” Assets
$DIA, $SPY, $QQQ, $VXX
“I do not like bonds; I do not like most stocks, I do not like private equity,” Mr. Gross, who runs the $1.5-B Janus Global Unconstrained Bond Fund, wrote in his monthly investment outlook Wednesday. “Real assets such as land, gold and tangible plant and equipment at a discount are favored asset categories.”
“Sell everything,” DoubleLine Capital’s Jeffrey Gundlach said last week. “Nothing looks good here.”
Mr. Gross’s unconstrained fund returned 4% this year through 1 August, outperforming 69% of its peers. Its largest investments as of 30 June included shares of SABMiller Plc, bonds from Ally Financial Inc. and Ford Motor Credit Co. and the sovereign debt of Mexico and Argentina.
The fund, with about 50% of its money coming from Mr. Gross’s personal fortune, has earned 3% since he took over in October 2014 after leaving Pacific Investment Management Co.aka PIMCO.
“Sovereign bond yields at record lows aren’t worth the risk and are therefore not top of my shopping list right now; it’s too risky,” Mr. Gross said in a statement Tuesday. “Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price.”
In his August outlook for Janus Capital Group Inc., Mr. Gross said the financial system will not break down immediately. The time will come “when investable assets pose too much risk for too little return.”
Low interest rates already hurt returns for banks, insurance companies, pension funds and individual savers, he says. Central banks have not figured out an “end game” for their efforts to stimulate economies by buying sovereign debt and other investments that are failing to prove effective.
“Central bank ‘promises’ of eventually selling the debt back into the private market are just that, promises/promises that can never be kept,” he wrote.
Nominal growth needs to reach 4 to 5% in the US, 3 to 4% in Europe and 2 to 3% in Japan before the global economy “devolves into Ponzi finance, and at some point implodes.”
Wednesday, the 3 US major market stock indexes finished at: DJIA +41.23 at 18355.00, NAS Comp +22.00 at 5159.74, S&P 500 +6.76 at 2163.79
Volume: Trade was moderate with about 873-M/shares exchanged on the NYSE.
- Russell 2000 +6.6% YTD
- S&P 500 +5.9% YTD
- DJIA +5.3% YTD
- NAS Comp +3.0% YTD
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