Best of the Week
Most Popular
1.US Dollar Crashes, Gold And Bitcoin Skyrocket As Economic Recovery Lie Is Exposed - Jeff_Berwick
2.Now Obama Warns Americans to ‘Be Prepared’ for Disaster… What Does He Know? - Jeff_Berwick
3.EU Referendum - Britain's Immigration / Migrant Crisis Explained - Nadeem_Walayat
4.EU Referendum - British People vs Establishment Elite, Vote LEAVE an Act of Defiance! - Nadeem_Walayat
5.Prominent Billionaire Investors Warn of Financial Crash, Quietly Position Themselves - MoneyMetals
6.Bankers Warn of BrExit Financial Armageddon if British People Vote for Freedom - Nadeem_Walayat
7.Bad U.S. Jobs Report Prompts Stocks Bear Market Rally Towards New All Time Highs! - Nadeem_Walayat
8.Gold And Silver – Friday May Have Marked A Pivotal Turnaround - Michael_Noonan
9.EU Referendum - British People vs Establishment Elite, the Illusion of Democracy and Freedom - Nadeem_Walayat
10.Felix Zulauf: Monetary Stimulation Creates Bubbles, Not Prosperity Nor Growth - GoldandLiberty
Free Silver
Last 7 days
Investors Map Post-Brexit Strategies Amid Global Market Upheaval - 26th June 16
Gold Price Weekly COT Update - 26th June 16
First the UK, then Scotland ... then Texas? - 26th June 16
Stocks Bear Market Resumes or Just More Noise - 26th June 16
Gold And Silver: Security, And BREXIT - 25th June 16
Dow, Euro & Brexit Recap - 25th June 16
Resistance Holding Gold Stocks after Brexit - 25th June 16
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16
Could Central Bankers Be Gold and Silver's BIGGEST Allies? - 20th June 16
Words Still Mean Things – Brexit With Graham Mehl - 20th June 16
Baroness Warsi the Manchurian Candidate Quits LEAVE for REMAIN, Boris Johnson Next? - 20th June 16
FTSE Soars, Stock Markets Bounce on LEAVE Polls Surge, Bookmakers Widen BrExit Odds - 20th June 16
Brexit Would Trigger Devolution of Europe - 20th June 16
Stock Market Week Of Uncertainty - 20th June 16
Will Gold’s Bullish Price Chart Outperform Gold’s 5 Bearish Indicators? - 20th June 16
Bonds And Stocks At All-Time Highs: Are Markets Confused Or Broken? - 20th June 16
Silver Sleeping On the Job - 19th June 16
BrExit Odds Sink, REMAIN Polls Boost by Jo Cox Killing by Radical Right Extremist, Conspiracy? - 19th June 16
How Elliott Waves Tell You When to "Jump In" & When to "Jump Out" of Markets - 18th June 16
Stock Market Inflection Point During Bifurcation - 18th June 16
Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - 18th June 16
Gold Stocks - Bull Markets that Follow Epic Bears - 18th June 16
The Fed Giveth and the Gold Bullion Banks Taketh Away… - 17th June 16
Brexit: "The Vote Heard Around the World" - 17th June 16
Gold Stocks Summer Breakout? - 17th June 16
Stock Investors Get Higher Returns and More Dividend Income - In Less Time With Less Risk - 17th June 16
How to Use the Gold-to-Silver Ratio? - 17th June 16
Inflation, Deflation & Associated Trading Prospects - 17th June 16
Overnight Markets Struggling to Stay Flat - 17th June 16
Gold Price Surges to Highest in Nearly Two Years On Central Bank and Brexit Haven Demand - 17th June 16
Stock Market Thinking Upside Down; Dow 18k Still Key - 17th June 16
Jo Cox MP Terror Attack Killing Claimed for "Britain First" - Witness Report - 17th June 16
Stock Market, Iron Ore, Bitcoin – Is Silver Next for Chinese Momentum Investors? - 16th June 16
EU Referendum Campaigning Suspended Following Shooting of MP Jo Cox, Suspect Named as Tommy Mair - 16th June 16
Why People are Migrating to the UK, Illegal Immigration, Housing Crisis Consequences - 16th June 16
Stocks Fluctuate Following Recent Decline - Bottom Or Just Pause Before Another Leg Down? - 16th June 16
The US Consumer-Driven Economy Has Hit a Brick Wall - 16th June 16
Bitcoin Price Going Parabolic Again, Now At $730 and Up 60%+ In Last Three Weeks - 16th June 16
China's Hard Landing Has Already Begun! - 16th June 16
Crude Oil Price - Oil Bears vs. Support Zone - 16th June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Investing in Mortgages Makes Sense While Fed Supresses Yields

Interest-Rates / Mortgages Feb 23, 2012 - 01:40 PM GMT

By: Bloomberg

Interest-Rates

Best Financial Markets Analysis ArticlePIMCO founder and co-CIO Bill Gross spoke with Bloomberg Television's Trish Regan, Lisa Murphy and Adam Johnson today about where to invest, the ETF PIMCO is launching next week and the state of the economy.

Gross said that investing in "mortgages make sense" as "yields are not going anywhere for the next two or three years."


Gross on whether investors should be looking at mortgages:

"Sure. An agency mortgage, even a non-agency mortgage, but let's stick to agencies and Fannie and Freddie, they yield 1% to 1.5% to 2% more than those similar average life Treasuries. If you have an environment where interest rates will not change, and that is the key. Is Bernanke good to his promise? If they do not change, you would prefer to have a 1.5% higher yield, a 3% to 3.5% yield as opposed to a 2%. I think mortgages makes sense. The extension of risk adding to high-yield is another situation that is similar to the equity argument that I just made. Yes, you get a higher yield, but you are principle at risk. As you get older and more fixed- income oriented then perhaps you want to stick to something safer."

On why PIMCO is announcing a new ETF next week that will mimic the Total Return Fund:

"That is a complicated answer, but technically the fees are the expenses on an annual basis are less on the Total Return Fund that now exists versus the ETF. There will be a slight difference, but of course you don't pay the all-in retail fees and you could make the argument that it's a lot cheaper as an alternative. The ETF is limited to the extent it can't use futures and optional types of securities that have been successful with the Total Return Fund. Basically they will be the same. We are excited to provide the same types of returns for that ETF as we do for the Total Return Fund and allow individual investors to buy it on the New York Stock Exchange. We do not suggest they trade it, but we think they can buy it at 10:30 in the morning, as opposed to the market closing and have a great longer-term performance record."

Gross on whether the economy and investing environment has improved:

"I think they are. We should analyze why. I think that is always difficult, but I think in this case with central banks writing checks in the hundreds of billions, and yes we're doing that with our Operation Twist, and the ECB is doing that with LTROs, and Japan has stepped it up, and China has been writing checks in terms of increasing their monetary base. There has been a huge flush of money into global markets and ultimately into global economies. You would expect that to happen. That does not mean that is the solution, or the forever solution, but certainly temporarily it has helped to support the economy, and therefore financial markets."

On whether he's changed his position in U.S. Treasuries:

"I do not think so. It is important to recognize, as we a tried to recognize at PIMCO for the past several quarters and past several years, that there are negative repercussions to writing checks and printing money. It is not just inflationary. To the extent that zero-based money that we have here in the United States, that we're seeing in the U.K. and close to that in euro land, it begins to reap some unexpected havoc in terms of the real economy as well. Financial institutions like banks and insurance companies start to close branch offices and lay off people simply because the cost of money does not support the prior economic activity that historically has been the example."

On whether Bernanke's promise to keep low interest rates through 2014 is distorting the bond market:

"I think it does. There is no doubt. It's something to be reckoned with. You don't want to fight the Fed, as they say. To the extent that yes, they have conditionally promised to keep interest rates low, in Bernanke's vernacular that basically means 25 basis points for the next three years or so, then that produces an artificially to interest rates. There is no doubt that real interest rates now certainly from the standpoint of the policy rate and even from the standpoint of five-year tip, for instance, an inflation protected security at a -1.25% relative to historical parameters, that is 1-2%, maybe even 3% lower than they should be. Yes, Treasury yields are artificially suppressed."

On whether he still wants to be in Treasuries:

"You do from the standpoint of recognizing the Fed is good to its promise, and that is something to consider, but if Fed is good to the promise, then interest rates are not going anywhere for the next two-three years, and there is a 3% yield from a longer-term Treasury and 2% yield from intermediate-term Treasuries. Does that represent value? Not really. Certainly the saver and the investors being short-circuited, haircutted, based upon historical terms. If in fact the price of the securities cannot go down very much if the Fed holds to its promise, that is if it keeps interest rates low, then 2% is better than nothing. Put it that way"

On Leon Cooperman telling Bloomberg TV yesterday that the return on bonds is not worth owning them:

"I do not argue against that, and Mr. Cooperman has a decent argument. I just argued that in terms of confiscation of capital. There are several reasons to be cautious, however. One, comparing Treasury yields to corporate stock dividends spans a huge gap of risk. AAA for Treasuries and an implied B AA and lower for subordinated stocks as an investment instruments. Secondly, stocks can go down, too, just like bonds. We certainly saw that in 2008. Third, demographically, boomers prefer certainty as opposed to speculative capital gains, so there's an element to that."

On why Ford is shifting billions of dollars a year from their equity portfolio into bonds:

"They're doing that because of the certainty, locking in their liabilities relative to their assets. Even at a low, 2-3% rate. Boomers, from the standpoint of individual investors, are the same way. They're beginning to get older and require more certainty. Do they find appeal in a Johnson and Johnson at 3.5% dividend yield with growth potential? Sure they do, but they also believe they want that money back, and if there is a 2008-2009 scenario, perhaps they won't. So there are demographic tradeoffs here that have to be considered."

bloomberg.com

Copyright © 2012 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife