Low interest rate may persist for decades: Pimco

[reporter2]

http://www.straitstimes.com/archive/...pimco-20131005

Low interest rate may persist for decades: Pimco

Published on Oct 05, 2013


NEW YORK - Famed investor Bill Gross, manager of The Pimco Total Return Fund, said the global economy may be facing low policy rates for decades.

Mr Gross wrote in his October investment outlook this week that investors should "bet against" expectations that the federal funds rate - the US Federal Reserve's benchmark short-term borrowing rate - will rise by one percentage point by late 2015.

"The US (and global economy) may have to get used to financially repressive - and therefore low policy rates - for decades to come," wrote Mr Gross, a co-founder and co-chief investment officer at Pimco, whose flagship Pimco Total Return Fund has roughly US$250 billion (S$312 billion) in assets.

"Right now, the market (and the Fed forecast) expects fed funds to be 1 per cent higher by late 2015 and 1 per cent higher still by December 2016. Bet against that," he wrote in the letter entitled "Survival of the Fittest?"

His outlook on the level of rates is important because Pimco manages roughly US$1.97 trillion and is one of the world's largest bond managers.

Mr Gross' and co-chief investment officer and chief executive Mohamed El-Erian's views on Fed actions and global credit also influence other investors because of the firm's size in the marketplace.

The Fed has held its overnight funds rate between zero and 0.25 per cent since December 2008 and has more than tripled its balance sheet to around US$3.7 trillion, in an effort to pull the US economy out of recession and spur stronger economic growth.

On Sept 18, the Fed reiterated that it would not start to raise interest rates at least until unemployment falls to 6.5 per cent, as long as inflation does not threaten to go above 2.5 per cent. The US jobless rate in August was 7.3 per cent.

The Fed also surprised investors by keeping its US$85 billion in monthly purchases of Treasuries and agency mortgages unchanged, confounding many who had expected a reduction.

Mr Gross's Pimco Total Return Fund gained 1.8 per cent in September, its best monthly performance since Jan 2012, according to data from Morningstar. That performance beat 98 per cent of peers, the investment research firm said.

The fund is still down 1.97 per cent for the year, according to the Pimco website.

REUTERS

[phantom_opera]

With Yellen onboard, this might be the likely outcome

that is exactly what u need when u have mortgage loans

huat ah !!!

[riverfish]

Yes, looking at the state of the US economy, I do not think they can afford to raise interest rates anytime soon. The longer the world gets accustomed to easy money, & with that asset-price inflation, the harder it will be for them to pull the plug later, without triggering a global economic crisis.

So the overall picture says "cash is NOT king", in this situation, pple holding onto cash will be the greatest losers i.e. many working class folks all over the world.

So long as US keeps printing money, I think it makes sense to hold onto good properties.

[indomie]

Yes, looking at the state of the US economy, I do not think they can afford to raise interest rates anytime soon. The longer the world gets accustomed to easy money, & with that asset-price inflation, the harder it will be for them to pull the plug later, without triggering a global economic crisis.

So the overall picture says "cash is NOT king", in this situation, pple holding onto cash will be the greatest losers i.e. many working class folks all over the world.

So long as US keeps printing money, I think it makes sense to hold onto good properties.

The key word is "good properties". What is a good property?

[riverfish]

The key word is "good properties". What is a good property?

Can't say that I am an expert in identifying good properties, since I don't spend a lot of time property scouting. General rule: (1) location, location & location, (2) FH preferably (3) well-designed, good layout

What is expensive now, may not be so five years later.... so long as USA keeps its easy money policy intact.

[chestnut]

For your reading pleasure

http://wallstcheatsheet.com/stocks/t...n.html/?ref=YF

[Ringo33]

For your reading pleasure

http://wallstcheatsheet.com/stocks/t...n.html/?ref=YF

They need to make it sound like they have a choice even if they dont.

[indomie]

They need to make it sound like they have a choice even if they dont.

The world is not ready for USA demise yet. For now the world just follow the USA wayang show. Even if USA credit is no good, but they are the one doing much of the buying now. So we all pretend the problem is not there, business as usual. We need the "illusion of wealth". Without illusion of wealth, our civil society will ceased to exist.

[RSG]

The world is not ready for USA demise yet. For now the world just follow the USA wayang show. Even if USA credit is no good, but they are the one doing much of the buying now. So we all pretend the problem is not there, business as usual. We need the "illusion of wealth". Without illusion of wealth, our civil society will ceased to exist.

Well said.

[indomie]

The world is no longer as productive as it used to. There are less farmers and factory workers now. There are more lawyers and bankers. In this situation how can a world sustain a high interest rate? Who is going to pay high interest rate when almost all nations are highly indebted?

[star]

What will happen to the bears if interest rate start to raise in year 2030.

[indomie]

What will happen to the bears if interest rate start to raise in year 2030.

I predict. Those bears will be 17 years older in 2030.

[land118]

http://www.cnbc.com/id/101127962

Fed could up QE to $1 trillion a month

Marc Faber

Published: Monday, 21 Oct 2013 | 10:35 AM ET
By: Matthew J. Belvedere | Producer, CNBC's "Squawk Box"

Marc Faber, publisher of The Gloom, Boom & Doom Report, told CNBC on Monday that investors are asking the wrong question about when the Federal Reserve will taper its massive bond-buying program. They should be asking when the central bank will be increasing it, he argued.
"The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion] , $200 [billion], a trillion dollars a month," Faber said in a "Squawk Box" interview.
The Fed—which is currently buying $85 billion worth of bonds every month—will hold its October meeting next week to deliberate the future of its asset purchases known as quantitative easing.

(Read more: Treasury yields will still spike to 5%: Societe Generale)

Faber has been predicting so-called "QE infinity" because "every government program that is introduced under urgency and as a temporary measure is always permanent." He also said, "The Fed has boxed itself into a position where there is no exit strategy."

The continuation of Fed bond-buying has helped support stocks, and the Dow Jones Industrial Average and S&P 500 Index are coming off two straight weeks of gains, highlighted by record highs for the S&P.

While there may be little inflation in the U.S., Faber said there's been incredible asset inflation. "We are the bubble. We have a colossal asset bubble in the world [and] a leverage or a debt bubble."

Back in April 2012, Faber said the world will face "massive wealth destruction" in which "well to-do people will lose up to 50 percent of their total wealth."

In Monday's "Squawk" appearance, he said that could still happen but possibly from higher levels because of the "asset bubble" caused by the Fed.

"One day this asset inflation will lead to a deflationary collapse one way or the other. We don't know yet what will cause it," he said.

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

[sgbuyer]

http://www.cnbc.com/id/101127962

Fed could up QE to $1 trillion a month

Marc Faber

Published: Monday, 21 Oct 2013 | 10:35 AM ET
By: Matthew J. Belvedere | Producer, CNBC's "Squawk Box"

Marc Faber, publisher of The Gloom, Boom & Doom Report, told CNBC on Monday that investors are asking the wrong question about when the Federal Reserve will taper its massive bond-buying program. They should be asking when the central bank will be increasing it, he argued.
"The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion] , $200 [billion], a trillion dollars a month," Faber said in a "Squawk Box" interview.
The Fed—which is currently buying $85 billion worth of bonds every month—will hold its October meeting next week to deliberate the future of its asset purchases known as quantitative easing.

(Read more: Treasury yields will still spike to 5%: Societe Generale)

Faber has been predicting so-called "QE infinity" because "every government program that is introduced under urgency and as a temporary measure is always permanent." He also said, "The Fed has boxed itself into a position where there is no exit strategy."

The continuation of Fed bond-buying has helped support stocks, and the Dow Jones Industrial Average and S&P 500 Index are coming off two straight weeks of gains, highlighted by record highs for the S&P.

While there may be little inflation in the U.S., Faber said there's been incredible asset inflation. "We are the bubble. We have a colossal asset bubble in the world [and] a leverage or a debt bubble."

Back in April 2012, Faber said the world will face "massive wealth destruction" in which "well to-do people will lose up to 50 percent of their total wealth."

In Monday's "Squawk" appearance, he said that could still happen but possibly from higher levels because of the "asset bubble" caused by the Fed.

"One day this asset inflation will lead to a deflationary collapse one way or the other. We don't know yet what will cause it," he said.

—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

Marc Faber has been predicting a market crash since early this year.

[Shanhz]

"One day this asset inflation will lead to a deflationary collapse one way or the other. We don't know yet what will cause it," he said.:

i only hope it is a depression and not world war that will end this money printing.