Bill Gross: The Caine Mutiny (Part 2)

... I would like to continue down the route of previous months’ Investment Outlooks and discuss the immediate threat to investment portfolios represented by low policy rates (fed funds in the U.S.) and the increasing negative real yields that they engender as inflation accelerates.

I spoke last month to the reality of investors being “skunked” and having their pockets picked simply by receiving yields less than inflation,

and suggested that as a major reason why the PIMCO ship was carrying a limited supply of Treasuries on board. Although we have warned for several years of the deteriorating creditworthiness of America’s AAA rating, our de minimis Treasury positions had less to do with much more immediate issues than America’s balance sheet prospects.  

We are highly sensitive to the pocket-picking policies that governments in general deploy...

Link: http://www.pimco.com/EN/insights/pages/the-caine-mutiny-part-2.aspx

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