Head of the world’s largest bond fund, Bill Gross of Pimco said the US, with its high level of national debt and government borrowing, belonged in the ‘ring of fire’ with Greece, Spain, France, Japan and the UK. He noted: “only gold and real assets would thrive” unless spending is cut and taxes rise.
“The US and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult,” he continued switching metaphors to make the same point.
US the next Greece?
“If we continue to close our eyes to deficits … then the US will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt-to-GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed.”
It’s a timely warning from the Bond King but is anybody listening? Even if they are then nothing is being done except in Greece and Spain to get the deficits down and debt lower. The US, UK and Japan all have ballooning debts.
The US at least faces its ‘fiscal cliff’ of automatic tax rises and spending cuts next year unless the new Congress decides otherwise after the elections next month. That said if this action goes ahead it will immediately plunge the US economy back into recession.
Gold and property
Is it any wonder then that the professional investors continue to highlight the attractions of gold and real estate? That said gold could face an imminent correction and real estate buyers need to be sure they are not overpaying for low-yield property left over from the last bubble, like UK and Australian housing.
This is a very tough environment to be an investor. Bonds are supposed to be low risk investment but the risk to capital is enormous if interest rates rise, and that has already happened in Spain and Greece. Who’s next?
Fed is preparing the way for US austerity reckons SocGen
Alain Bokobza, head of global asset-allocation strategy at Societe Generale, talked about November’s US presidential election, Federal Reserve policy and the outlook for Europe with Maryam Nemazee on Bloomberg Television’s ‘The Pulse.’
If he is right about the true reason for Fed money printing ‘then a US recession and stock market correction are on the horizon”
Buy gold, oil and copper as a defense against inflation says Aimed Capital founder
Daniel Weston, founder and chief investment officer of Aimed Capital Management, discussed his investment strategy on Bloomberg. He sees a profit squeeze coming all over the world and a correction for equities.
The inflationary consequences of money printing by central banks has him looking at gold, oil and copper as hedges against inflation.