Bill Gross: "We See Bubbles Everywhere"

Tyler Durden's picture

It is only logical that when one of the smarter people in finance warns that he "sees bubbles everywhere" that he should be roundly ignored by those who have no choice but to dance. Because Bernanke and company are still playing the music with the volume on Max, and if not for POMO there is always FOMO. However, if there is any doubt why this "rally is the most hated ever", here are some insights from the Bond King from an interview with Bloomberg TV earlier today: "We see bubbles everywhere, and that is not to be dramatic and not to suggest they will pop immediately. I just suggested in the bond market with a bubble in treasuries and bubble in narrow credit spreads and high-yield prices, that perhaps there is a significant distortion there. Having said that, it suggests that as long as the FED and Bank of Japan and other Central Banks keep writing checks and do not withdraw, then the bubble can be supported as in blowing bubbles. They are blowing bubbles. When that stops there will be repercussions. It doesn't mean something like 2008 but the potential end of the bull markets everywhere. Not just in the bond market but in the stock market as well and a developing one in the house market as well."

As a gentle reminder, the reason why nobody anywhere trusts this particular bubble - the biggest in history - is not because speculators are not greedy (they are), or because everyone knows the market is always one central planner wrong move away from a collapse which would make the 2009 lows seem like amateur hour (it is), but because, as Seth Klarman explained two weeks ago, it is the Fed itself which by pushing on a string and the economy constantly deteriorating, proves it has no idea how to make things better: "When you tell the populace that we can all enjoy a free lunch of extremely low interest rates, massive Fed purchases of mounting treasury issuance, trillions of dollars of expansion in the Fed's balance sheet, and huge deficits far into the future, they are highly skeptical not because they know precisely what will happen but because they are sure that no one else--even, or perhaps especially, the  policymakers—does either."

And today from Bill, on the reason why QE is not working as intended, and why the Fed's channels are not only clogged but never worked as intended in the past four years: "Does it mean it is a good thing that capitalism should thrive under this quantitative easing posture on the part of central banks that distorts markets and this court's capitalism and promotes a zombie corporations and lowers net interest margins and destroys business model? All of that is the negative aspects of quantitative easing. Can we live with? I do not think this will be with us for a long time."

One can hope.

Some other observations from Gross:

On how distorted the bond marker is:

"It is easy on the bond side. We speak to an epical bond/bull market, not the beginning of a bear market but the ending of an epical bond/bull market show it in terms of a smiley face. It has been the investment committee. The bright side of the smile is the thirty year bull market in which prices rose exceeded what rationally could have been expected. We are at the bottom basically of this smiley face and our opinion on a long-term basis. That means with treasury yields and credit spreads, importantly and here is the key to the bond market statement: treasuries are 80 basis points, credit spreads are 70 basis points, put them together, 150 basis points in combination. In our opinion, absent of an additional amount of quantitative easing treasuries will go down in yield because of slowing economy, but that will make spreads go up. This suggests a 20-Month time ahead in which treasury, corporate, and high yields do not move much. The end of the smiley face all market run in terms of higher yields and lower prices is over.

On whether the conditions today are reminiscent of what we saw in 1992 and 1993:

"I do not think so, because in 1994 the FED raised funds dramatically to 200 basis points to basically slow things down. If the FED did that this time, I think they know with this amount of leverage there is two to three times more leverage in this economy this time than in 1994, the FED does not dare move in 200 basis point increments. That kind of market to our way of thinking is not in store for us. Does it mean it is a good thing that capitalism should thrive under this quantitative easing posture on the part of central banks that distorts markets and this court's capitalism and promotes a zombie corporations and lowers net interest margins and destroys business model? All of that is the negative aspects of quantitative easing. Can we live with? I do not think this will be with us for a long time. For the next 12-24, perhaps.

On when the Federal Reserve will start to taper the billions of dollars in bond purchases:

"It is almost a day-to-day thing in terms of the market but certainly not in the terms of the FED. They had objectives in terms of 6.5% unemployment and importantly, 2.5% inflation. We're down to 1 percent inflation in terms of the PCE which is their target for inflationary measure. To think the fed would begin to pull back in terms of tapering when inflation is approaching the Japanese levels of the lost decade is a big stretch. I do not think they change much. I think they have to be concerned about what happens in asset markets. Up until this point the chairman has done an Alan Greenspan and said cannot really relieve him as such but will monitor them in terms of potential regulation. However, having said that, I think the FED basically is on hold for a long time until unemployment and more certainly, inflation moves higher to the 2.5% target.

On the implications of the end of the 30-year bull market in treasury:

"It is not just treasuries. Treasuries, corporates, high-yield. We actually saw the end of the treasury market about six months ago. I think only a few weeks ago when you put the whole enchilada together, what does it mean going forward? It means as interest rates eventually go up, we do not think they are going up for 12 months or so, that the cost of interest for them move forward. And the portly, households will increase as well. Because of the lag effect in terms of the average cost of debt for corporations, and even government, there is a fair amount of room in terms of timing, even as interest rates move back up. Treasury yields on average are above 2%. In terms of what they're issuing it is closer to 1%. Same thing in terms of relative magnitude on the front of corporatations and households. It will be a while until this "smiley face" where higher interest rates begin to affect corporations and the credit sector as well as the government sector in terms of the cost of leverage in the cost of borrowing. Eventually, a net interest margins narrow on the part of corporations because they will hire in terms of interest. Same things for households they pay higher for mortgage loans. That is two to three, four years out. We don't have to worry about it yet, but we have to worry about it.

On the great experiment and what is happening in Japan right now in the shift:

"We want to be able to monitor in the Tokyo office. They are in touch with the institutions in Tokyo. We want to be able to monitor where the money is going. Our sense is not much of it, some of it, is going outside the country. The metaphor for the Japanese small investor, Mr or Mrs. Watanabe, when she or he begins to sense there are more attractive yields outside of Japan and the Japanese Yen moving lower in the yields and lower in price that they can capture a higher total return by moving outside that is where they will go. We want to get in front of them so to speak. Where will they go? Typically they went to the Euro and bought a lot of France and Germany. Those markets we think our extended close to zero. Italy and Spain perhaps at the periphery. And back to the good ol' United States. We think it will buy treasury bonds at 80 basis points above the five-year and close to 1.90 or so for the 10-year treasury. It does not sound like a deal, but a much better field in Japan

* * *

So to summarize: the great bond bull market is over, but Japan will buy everything about 1.90% on the 10 Year. Perhaps this is why, somewhat counterinuitively, Pimco has been buying up every Treasury it could find in the past 6 months, or around the time Pimco "saw the end of the treasury market about six months ago." Just in case someone takes Bill a little too literally.

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Say What Again's picture


How about Mo-Fo?

francis_sawyer's picture

There is one bubble left... & that is the bubble in CheesePopebux...


It's the bubble that allows all other bubbles to exist...

"When I was a kid & we wanted a 'jacuzzi', we had to FART in the tub"

~ Billy Ray Valentine [Capricorn]

Ruffcut's picture

For the last hundred years it has been bubbles made from cow farts. At least half of everything you have or ever got was create by ponzi. HOpe you enjoyed it.

Stackers's picture

2017 - year of the storm

TheFourthStooge-ing's picture

Bubbles? According to Paul Klugman, the award-winning star of TV's Quincy, M.E. (Magical Economist), and confirmed by all reports on CNBC, the only thing that is in a bubble is gold.

caribbeanbarry's picture

Trading Places reset...Love it.  +1000

They trynna catch me ridin dirty's picture

This is just like prison. At first you get the FOMO/POMO (drugs, candy, soup, etc.) from the big boys thinking it's free and they're just nice guys. Later however you pay them back through HOMO.

"Mindy wuz m'bitch. I loved 'im."

somecallmetimmah's picture

Yeah.  I'm pretty glad to admit I know nothing about that.


Eric Holder

reader2010's picture

You've got to D A N C E.

TheFourthStooge-ing's picture

Enroll now at the Chuck Prince Dance Academy!

asteroids's picture

"Push on a string" eh? The central bankers ignore demographics. There ain't enough young folks to pay off this idiotic debt. Ever. To make things worse. More folks retire every day. I really really don't understand the Japanse turbo print maneuver. If I was Japanse, of any age, I would just stop working and go on the dole. That would end the game right then and there for everyone.

wonderatitall's picture

i hate bubble. there i came out and said it. why? my girl friend blew bubbles and told everyone she loves blowing bubbles. its why i hate bernancket ,  the bearded bubble.

Charles Nelson Reilly's picture

But I thought QE was ending soon?  That is what all the insightful folks on CNBC are saying.

knukles's picture

Holy shit, man!
This morning I was trimming my toe nails and almost castrated myself when Cramer was taking about all the worlds bubbles
I have no idea what they're talking about anymore... They quit making sense long ago and now have reverted to gibberish.
I mean fuck me, I'd be embarrassed to be a guest on there anymore.

azzhatter's picture

I don't think anyone with self respect would appear on assclown Cramer's show.

NotApplicable's picture

Got yer foot up your ass?

shovelhead's picture

Either that or a very long dick worthy of the cinema.

'Knuckles "The Punisher"  Does the Eccles Building.'

madbraz's picture

Gross:  "I closed my eyes during 30 years and was proclaimed the king of bonds just because I happened to be at the right place at the right time when yields were above 10% and have gone down since.  Now that half a brain is required to figure out how things will turn out, I endlessly put out garbage in the media frightening people and making the worst calls one can make - after all, I sell bonds and now a bit of stocks and whatever happens I will be way fine - it's my clients that suffer.  I'm going out the Buffett way, idiotically proclaiming to know what is going to happen when I have absolutely no clue or if I do I just want you to keep buying my products."


derek_vineyard's picture

if gross thinks everything is a bubble......then he should be incarcerated for selling the shit

kralizec's picture

Who cares?!  This chick is HOT!!!

TheFourthStooge-ing's picture


Who cares?!  This chick is HOT!!!

She sounds like a Jissbonful.

azzhatter's picture

And conversely, Bill Gross is not a handsome man. If you're into that sort of thing

CrashisOptimistic's picture

How can there be yield increase with no organic growth.

We're going to see Q2 GDP at 1%, WITH $1T/yr of monetary stimulus and 700B of fiscal.  What would it be with no stim at all?  Exactly where it was in 2008, negative.


ziggy59's picture

I see dead bubbles...

0b1knob's picture

I see dead people.   BRAIN dead people.   

WhiteNight123129's picture

Silver is not too bubbly those days, down 50% from recent highs...

IdeasRbulletproof's picture


Edit: I guess when push comes to shove, there's always APMEX.

Inthemix96's picture

Until people start seeing that shysters like Mr Gross are part of the problem we will all still suffer.

Tell me sages, which one of you have invested money with this billionare and won?  Ever wondered why this shyster billionare has that money eh?  Thats right folks, skimming the fuck off guliable fuckers who are easily led, or out right robbing them.

Anyone of you lot know someone who had an 'Endownment' mortgage?  I do, I know loads of them including my parents, and funnily enough, they never paid off neither.  A fool and his money are easily parted, and the greedy not so much.

Fuck Mr Gross, and fuck all like him, parasites on your collective backs folk, turn around and walk away.  Never done an honest days work in his life, probably cant change a light bulb, but can screw folk sideways out of hard earned money that can.

Another cunt, a seriously nefarious one though.  I fucking hate skimmers like this twat.

akak's picture

I wouldn't invest with the prick just because of his creepy Tinkerbell voice.

Inthemix96's picture

You know what I'm talking about though akak.

Lowest common denominator is gross, same as his name.

Fuck him and the horse he rode in on.

akak's picture

Gross is just the opportunistic vulture who follows and cleans up after the hyenas.

Inthemix96's picture

Spot fucking on.

Exactly the way I see him.

TheFourthStooge-ing's picture

Inthemix96 said:

Another cunt, a seriously nefarious one though.  I fucking hate skimmers like this twat.

Their skim includes a good chunk of any money they make for their clients. They should have to pony up a chunk of any money they lose for their clients as well.

That would get a lot of those fuckers to jump.

Inthemix96's picture

Well played stooge,

And once again, spot on.  When the time comes, this gross is another hanger.  Parasitical cunt, preying on the less well informed, just the mark of the man isnt it?  I hate these fuckers with a passion.  Inside dealing fucker, as long as his pile grows whats he care eh?

He fucking doesnt folks, wake up and walk away.

Downtoolong's picture

Walk away to where? That’s the $64 question we’re all searching for an answer to isn’t it; fully aware that TPTB aren’t dumb enough to leave the gates open to such opportunities. And if you do manage to climb out or escape (like getting out of debt or getting into gold)  they’ve got fifteen creeps with rubber hoses and whips waiting on the other side to beat you down and force you back into their corral. As an investor in the markets today, I feel like I’m getting a glimpse of what it was like living in a factory town, where you were forced to accept script for your pay which could only be spent at the company store.

ghostfaceinvestah's picture

The malinvestment the Fed is fostering is enormous, I see it every day.

When this turns, and it will turn, the crash is going to be epic.

buzzsaw99's picture

Even Gross can't be this naive:

When that stops there will be...

When it stops? LMAO!

And today from Bill, on the reason why QE is not working as intended...

Come on Bill, it is working exactly as intended, making Buffett et al wealthier. The transmission is clogged? Please mutha fugga.

Stopped reading right there. Bill is disingenuous at best.

Dr. Engali's picture

Bill If I were you I would just retire. You had a good run, hang it up before you look any more ridiculous than you currently do. You're trying to prognisticate in an environment where everthing is manipulated and eventually there is only one way to go. 


I would love it if one of these big shots when asked the question " what do we doi?" ..would just say..the fed is printing buy the fucking dip! End of interview.

Yen Cross's picture

     Based on the way inflation is calculated by .gov, a loaf of bread will cost $10 when the Fed. 2.5% target is reached.

buzzsaw99's picture

Right on Yen. That's why I own TIP. I love having smoke blown up my ass every month. It feels good.

Yen Cross's picture

    Smart man Buzz.;-)

They Tried to Steal My Gold's picture

“The president has put in place an organization that contains the kind of database that no one has ever seen before in life. That’s going to be very, very powerful. That database will have information about everything on every individual in ways that it’s never been done before.”


– Rep. Maxine Waters, D-Calif.

ParkAveFlasher's picture

That b!+ch has the kind of face you can smell.

knukles's picture

Can she tie her own shoes?