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December 3, 2012

Are securities over-inflated largely because of central government policies?


''Bill Gross, co-head of the world's largest bond manager, repeated his call that interest rates would remain low for at least two more years.

'Our primary thrust has been to focus on what we are most (although not totally) confident about, that the Fed will hold policy rates stable until 2016 or beyond,' Gross, co-chief investment officer of $1.97 trillion Pimco, wrote in a monthly note to clients Tuesday.

Gross made a similar pronouncement in July and has so far been right -- interest rates are still near zero.  At the same time, Pimco's largest mutual fund, the $247 billion Total Return Fund Class A, has struggled this year relative to other asset classes, especially stocks.  It's down 3.2 percent year to date through November.

Gross warned that investors are putting money in risky assets that have gained in value largely because of central government policies.

'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,' he wrote.

Gross said global economies and their 'artificially priced' markets are 'increasingly at risk.'  But he compared their eventual unwinding to the shape of an eagle's wings as opposed to a 'T' shape.  In short, deleveraging will likely occur gradually not suddenly.''

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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