Gidoen Osborne's economic strategy has been savaged by the head bond vigilante Bill Gross, branding it "suicide", reports Left Foot Forward's Cormac Hollingsworth.
Remember this headline last year in the Daily Mail?
“Don’t invest in Britain: The UK economy sits ‘on a bed of nitroglycerine’, investors warned”
That was Bill Gross, as co-CEO, co-CIO of Pacific Investment Management (PIMCO) – the world’s biggest bond fund – he’s the biggest bond market vigilante out there.
He’s been a cheerleader for cutting deficits as quick as possible; he said a year ago:
“The UK is a must to avoid. Its gilts are resting on a bed of nitroglycerine.”
And in April this year, Mr Gross took a similar stance to the US bond market, but in addition to selling all his holdings he took the unusual step of selling more and went short.
Since then, growth has collapsed worldwide leading to record low yields in world bond yields. Mr Gross’s view (£) now is that it was a “mistake” to bet so heavily against the US markets.
We’ve been saying that the bond market is making it very clear we should be worried about growth and the deficit; Mr Gross’s language is always more pithy and to the point, telling Bloomberg Radio today:
“To do it [cut government spending] right now is almost suicidal.”
20 Responses to “Head bond vigilante brands Osborne’s strategy economic “suicide””
Tangram
Head bond vigilante brands Osborne™ strategy economic suicide | Left Foot Forward http://t.co/FWwPXnK
Guido Fawkes
He isn’t the head bond vigilante, he has lost his touch big time.
He isn’t even in the top 100:
The Wall Street Journal
Pacific Investment Management Co.’s $245.5bn (€170.4bn) Total Return Fund, the world’s biggest bond fund run by Bill Gross, has returned 2.99% this year through Wednesday, underperforming its peers as the fixed income titan’s bearish view on Treasurys was undone by their bull run of the past few months.
The Pimco fund ranks 157th out of 179 funds in the category of intermediate-term bond funds tracked by Lipper. Over the past three months, the vehicle has generated a return of negative 0.04%, compared with a return of 2.7% from the benchmark Barclays Capital Aggregate Bond Index, as per figures from Morningstar.
London IWW
Head bond vigilante brands Osborne’s strategy economic “suicide” http://t.co/c0RvFSV | #UKeconomy
Kim Blake
Head bond vigilante brands Osborne’s strategy economic “suicide” http://t.co/c0RvFSV | #UKeconomy
Cormac Hollingsworth
Mr Bill Gross manages the Total Return Fund, the world’s largest bond mutual fund, the PIMCO Total Return Fund. $240.7 billion at December 2010. You are right that he under performed the market, that’s what happens when you short the market. This underperformance is very rare, and it’s prompted a rethink. The market has told him that he’s wrong in his view of an insolvent west, and he’s humble enough to take the lesson and tell the rest of us what he now thinks. He is the best bond fund manager out there, we should listen.