Bill Gross's Commentary on US Inflation
June 02, 2008
– Comments (7) |
RELATED TICKERS: GLD
, INP
, FXI
Here is the link
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+June+2008.htm
Nothing earth shattering .....mostly a reinforcement of what a lot of fools have been collectively expounding over here.
Here's the gist of the recommendation ( sales pitch from Gross)
QUOTE:
What are the investment ramifications? With global headline inflation now at 7% there is a need for new global investment solutions, a role that PIMCO is more than willing (and able) to provide. In this role we would suggest: 1) Treasury bonds are obviously not to be favored because of their negative (unreal) real yields. 2) U.S. TIPS, while affording headline CPI protection, risk the delusion of an artificially low inflation number as well. 3) On the other hand, commodity-based assets as well as foreign equities whose P/Es are better grounded with local CPI and nominal bond yield comparisons should be excellent candidates. 4) These assets should in turn be denominated in currencies that demonstrate authentic real growth and inflation rates, that while high, at least are credible. 5) Developing, BRIC-like economies are obvious choices for investment dollars.
ENDQUOTE
Net net : No Treasuries or TIPS ( I completely agree on this one - its a joke), Commodities and BRIC equities.
Personally, I am a temporary commodity bear ( I think abit is one also - for the same reason). I am buying on at least a TEMPORARY deflationary scenario to begin with. Not just because of the US - but I think the increasing impending intervention that will happen in China and India - from a political and hence governmental standpoint.
I say that its Temporary - because if the Emergent economies somehow are successful in even partial decoupling - inflation will come back big - with the rest of the world still in a recovery non-growth mode - ie Stagflation. All depends on timing obviously.
OT: It was also interesting he starts with Lincoln's quote - and I was looking at ALD ( Statgeeks newest pick) and there they are linked to a book using the same quote. Incidentally, thought about Red thumbing ALD - their model is dependent on continuing ability to raise capital ,and now they are in a simple equity dilution mode due to dividend payout ( refer to Top Bear pitch calling it a PONZI) ......and they have about $400 MM in carrying investment losses - and lots and lots of leveraged Subordinated, Mezzanine debt to go around. Howeever, they are not a bank - a lot of regulations dont apply - so dont count on the marks coming at a fast pace - they can weather this out - as long as the funding liquidity music doesn't stop - read the bull pitches - about 40 years of history etc etc.....so they have believers - I think BSC had them too....just a matter of time and events coming together.
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