Book Talkin'

Tuesday, March 30, 2010

After a poor night's sleep, Macro Man was in a foul mood this morning as he stared bleary-eyed at his screens. That is, until he read this little pearl of investment wisdom, which induced a hearty burst of laughter:

Bill Gross May Be Predicting Bull Run in Stocks

March 30 (Bloomberg) -- This may be the best news for stocks in a long time: Bill Gross, who manages the world’s biggest bond fund, says the 30-year bull market in fixed-income securities is ending.

Though Gross, who runs Pacific Investment Management Co.’s $214 billion Pimco Total Return Fund, would never tell you to buy stocks, isn’t that what he means?

........

Full disclosure compels me to say that in even saying the words “bull market,” I’m talking my own book. My investments are in stock mutual funds. Smart people have a balance of stocks and bonds.

The column was laughable on a number of levels. Let us count the ways:

a) The very notion that for an equity market buoyed largely on a tide of over-abundant liquidity, that a period of consistently higher market interest rates could possibly be construed as bullish

b) That Mr. Gross's bearish comments on bonds directly translate into a view on stocks (it seems as if the author is wishcasting, not forecasting)

c) That Mr. Gross, Mr. "Dow 5000" himself, should in any way be construed as any sort of authority on equities.

At least the author concedes towards the end of the piece that he is talking his own book, something that Mr. Gross notably fails to do in his many media appearances. To be sure, any listener with a modicum of nous should assume that this is exactly what he is doing: Mr. Gross does run a business, after all, rather than a charity. (ed. note: Didn't he once offer to run the TARP for free, though?)

Still, Macro Man always has to chuckle when the media mindlessly parrots whatever view Mr. Gross is espousing at a particular time, as if he were some sort of impartial public utility.

It is a handy rule of thumb that everyone, including your intrepid author, has some vested interest in what they say; otherwise, why say it? And if you don't know where that interest lies, your chances of being played for a sucker are magnified greatly.

(Naturally, Macro Man is providing this advice as a public service, out of the kindness of his heart. Really!)

In any event, now that the Greek 7 year is away (if not up, up), perhaps we can focus on more prosaic issues: like the tidy upside surprise in yesterday's German CPI figures. To be sure, the absolute level is still quite low, but the trend is quite clear.

If (and yes, it's a big if) Greece manages to avoid sinking like the Titanic, at some point the ECB will have to dust off those policy normalization plans that they hinted at in December and swiftly shelved in January. Perhaps it's time to look at bearish ERZ0 structures again?

Posted by Macro Man at 8:36 AM  

8 comments:

MM,

Have given up trading the whites in Euribor as don't have any edge on how the drain will evolve and what will happen on 12th May when everyone realises the chance of Greece meeting its gdp growth forecast ths year is nonexistent.

I do have the ERZ0 88/87/86 Fly on for 1.5 ticks but not willing to stump up premium when the potential outcome distribution is so wide.

dc said...
9:37 AM  

since now, bill gross was bearish at stocks and the stocks kept ralling...so imagine now that changed his view...;-)

g said...
9:42 AM  

Additionally, Mr. Gross came out on CNBC 1 hour after the 5 year note auction fiasco last week, to say the bond bull market is ending and if he is put on the spot, given that world growth continues + several other assumptions, he would pick stocks over bonds. But the media glossed over those qualifications and says "gross prefers stocks over bonds". A week or two before that, El-Erian called the 10 year rate to be range bound.

TulsaGuy said...
10:24 AM  

Note to all: Bill Gross f--ks up sometimes just like the rest of us.

AXA Asia deal closed, at least Nemo has something aside from macro trades to pay the bills these days.

Nemo Incognito said...
11:27 AM  

Greece Is The Word

(to be sung by Greek ministers)

Ignore the problems as we wave the wand
We gotta scrimp and save, we gotta sell these bonds
There's every danger we will go too far
We can default right now, because you know who we are

Greece is the word

They think our debt is just a growing pain
Why don't they understand, It's just a crying shame
We got these pensions that we have to pay
We start to find out now we got to kiss your Trichet

Chorus: (to be sung by German bankers)

Greece is the word (is the word that we heard)
It's got groove, it's got meaning
Greece is the debt, is the losses, the write-downs
Greece is the way we are feeling

Leftback said...
3:23 PM  

You're showing your age there, Lefty. Pity for the Greeks that nobody's singing "You're the one that I want"....

Macro Man said...
3:37 PM  

Mr Gross might perhaps, just possibly, have some hedges on here, that might benefit from selling of bonds? Then he can turn around and cover, and buy more bonds. Why? Well that's what bond shops do... that's really beyond the financial media to attempt to communicate to the public, however.

LB is thinking that if traders can't play the NFP number they will be forced to play ADP. That's assuming that a strong jobs number hasn't already been priced in by last week's move ...

Leftback said...
8:48 PM  

LB, that's Peter Griffin's favorite song on Family Guy too ....

Nemo Incognito said...
2:55 AM  

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