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"Say A Little Prayer" Bill Gross Warns, "Zombie Corporations Now Roam The Real Economy"
Having exposed the reality that the world's capital markets are a manipulated shell game, Janus' Bill Gross has a message for the perpetual bulls in his latest letter to investors - "say a little prayer." Gross continues, "low interest rates are not the cure – they are part of the problem," warning that ZIRP has enabled, "a host of zombie and future zombie corporations now roam the real economy. Schumpeter’s 'creative destruction' – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled." As he previously warned, when the central bank manipulation is removed the likely trajectory of prices is downward...
Janus Capital's Bill Gross Investment Outlook
I'm not what you would call a “prayerful” type of guy. Even at 30,000 feet, when the air gets rough, I never invoke the “God” word, settling instead for promising myself that if I ever get back to terra firma, I will never fly again, which I promptly forget days or even hours later. It’s not that I’m a non-believer in prayer’s ultimate destination, but more of a cynical take on why the Lord would hand out party favors to everyone that asked, or to those that asked most intently.
I do remember praying nightly as a child though, which might indicate that my mom and dad were better parents than I have given them credit for. I recited the Lord’s Prayer, then followed it up with the standard “God Blesses” – in my case “God Bless Mommie, Daddie, Chip, Lyn, Mamie, Budgie, Brenda, Stinky and everyone in the whole world.” Stinky was my brother’s cat, so named because she used the house as her personal litter box in the days before my parents could buy one at the local “five and dime”. Brenda was the neighbor’s bulldog but warranted a mention ahead of our own Stinky because – well – she didn’t smell. Funny how we prioritize our prayerful moments.
Funny, too I think, about how I learned two different versions of the Lord’s Prayer: one – the Protestant litany – spoke to “forgiving our debts as we forgive our debtors”; the other – maybe a more traditional Catholic influenced version – substituted “forgive our trespasses as we forgive those who trespass against us.” The differences never much bothered me as I prayed less and sinned more into my teenage years, but later I got to thinking about it as I entered the bond market and began to contemplate the odds of paying and being paid, or trespassing and being trespassed against with other people’s money. Given a chance, I thought I would infinitely prefer forgiving a trespasser as opposed to a debtor.
Debtors didn’t necessarily belong in a prison but then they didn’t belong in a prayer either, where forgiveness was akin to abrogation, default, and not getting your good old fashion money back! Over the following years then, my own kids got stuck with “trespasses” instead of “debts” even though I eventually realized – as do you, my more prayerful readers – that they are meant to convey one and the same thing. Still as I wound my way through my bond career, and the inevitable Penn Centrals, Continental Banks, and Lehman Brothers of this business, I had frequent moments of silence, if not teensy prayers, that gave thanks to the Lord for getting most of my (your) money back. Like bumpy air at 30,000 feet though, the next day I was flying again in the bond market but with a slightly firmer grip on the wheel. Life just seems to go that way.

Speaking of bumpy air, trespassing, and the forgiveness of debt, the Greek/German tragedy of midsummer seems to have landed on terra firma for at least a few months, although inevitably the weakness of the Eurozone with its common currency, but disparate fiscal philosophies spells renewed turbulence in financial asset markets. The Eurozone – and the Eurounion itself as Britain’s 2017 referendum may eventually reveal – is a dysfunctional family and may always be. Examples: 1) Germany vs. France; 2) the Balkans; 3) Southern peripherals; and 4) the more stoic Nordic countries. They are all so different that a common purpose seems to be missing. Perhaps that purpose if summed in three words might be “Peace and Prosperity” but while the peace seems to be assured by German passivity and the military blanket of NATO, prosperity is a subject of conflicting views as to which policies lead to long term growth. Draghi’s ECB and the Merkel controlled EZ ascribe to the old theory of “Feed a fever, starve a cold” – the “fever” in this case being financial bull markets fed with 0% credit, and the “cold” being fiscal austerity starved by balanced budgets. So far, the philosophy seems to be working well for Germany, miserably for Greece, and not so well for all other EZ countries in between.
But these conflicting views as to how to treat a fever or cure a cold are global in scope. Japan appears to be feeding both monetary and fiscal maladies with its persistent QE and substantial budget deficits, yet has little to show for it in terms of either inflation or real growth. China seems to resemble a desperate patient, changing doctors and proposed remedies every other month or so. First, it feeds the Shenzhen market fever, allowing it to “double bubble” in the first 6 months of 2015, then authorities starve it by “inactivating” two thirds of market listed shares, and then eventually create financial SOEs (state owned enterprises) to buy billions of stocks to bail out naïve first time investors and ultimately its own economy.
But, because it is the finance system’s global locomotive, it is the United States where this debate seems to be most critical, and where it subtly seems to be changing. It is not the fiscal stance that appears to be morphing, however. Republican “tax cut” orthodoxy will likely dominate for at least another few years. It’s monetary policy where the battleground for evolutionary ideas is taking place, as the Fed begins to recognize that zero percent interest rates increasingly have negative, as well as positive consequences. Historically, the Fed and almost all other central banks have comfortably relied on a model which assumes that lower and lower yields will stimulate not only asset prices but investment spending in the real economy. With financial assets, the logic is straightforward: higher bond prices and stock P/E’s almost axiomatically elevate markets, although the assumed trickle-down effect leading to higher real wages has not followed suit. In the real economy, it seemed almost straightforward as well: if a central bank could lower the cost of debt and equity closer and closer to zero, then inevitably the private sector would take the bait – investing in cheap plant + equipment, technology, innovation – you name it. “Money for nothing – get your clicks for free”, I suppose. But no. Not so.

Corporate investment has been anemic. Structural reasons abound and I have tried to convey that ever since my well-advertised New Normal, in 2009, which introduced the probability of a future generation of low real growth due to aging demographics, tighter regulations, and advancing technology permanently displacing workers. But there are other negatives which seem to be directly the result of zero bound interest rates. 3 month Libor rates have rested near 30 basis points for 6 years now and high yield spreads have narrowed and narrowed again in the quest for higher investment returns. Because BB, B, and in some cases CCC rated companies have been able to borrow at less than 5%, a host of zombie and future zombie corporations now roam the real economy. Schumpeter’s “creative destruction” – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled. And too, because of low interest rates, high quality investment grade corporations have borrowed hundreds of billions of dollars, but instead of deploying the funds into the real economy, they have used the proceeds for stock buybacks. Corporate authorizations to buy back their own stock are running at an annual rate of $1.02 trillion so far in 2015, 18% above 2007’s record total of $863 billion.
But perhaps the recent annual report from the BIS – the Bureau for International Settlements – says it best. The BIS is after all the central banks’ central banker, and if there be a shift in the “feed a fever” zero interest rate policy of the Fed and other central banks, perhaps it would be logically introduced here first. The BIS emphatically avers that there are substantial medium term costs of “persistent ultra-low interest rates”. Such rates they claim, “sap banks’ interest margins…cause pervasive mispricing in financial markets…threaten the solvency of insurance companies and pension funds…and as a result test technical, economic, legal and even political boundaries.” Greece is not specifically mentioned, nor the roller coaster ride of Chinese equity markets, nor the rising illiquidity of global high yield bond markets, nor the…well a reader should get the point. Low interest rates may not cure a fever – they may in fact raise a patient’s temperature to life threatening status. Yellen, Fisher, Dudley and company may not be in total agreement, but they assuredly are listening as this week’s Fed meeting will likely attest.
There is no statistical reason per se for the Fed to raise interest rates, yet absent a major global catastrophe we are likely to get one in September. But the reason will not be the risk of rising inflation, nor the continued downward push of unemployment to 5%. The reason will be that the central bankers that are charged with leading the global financial markets – the Fed and the BOE for now – are wising up; that the Taylor rule and any other standard signal of monetary policy must now be discarded into the trash bin of history. Low interest rates are not the cure – they are part of the problem. Say a little prayer that the BIS, yours truly, and a growing cast of contrarians, such as Jim Bianco and CNBC’s Rick Santelli, can convince the establishment that their world has change
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Raise the rates Yeller. Do it "for the children".
In China, he would've been executed.
A little prayer is never a bad idea.
A Debt Jubilee is coming, one way or another. Bank on it.
So much for The Committee to Save the World
http://content.time.com/time/covers/0,16641,19990215,00.html
-- Debtors don't belong in a prison. --
No but the people who pushed them into debt often do such as Roland Arnall and his kind.
Roland Arnall is in Purgatory as we write here, and will be joined by Corzine, Paulson, Mozilo, Fuld, Soros, Gates, Buffett, et al, real soon, mark my words.
I wouldn't call what's coming a jubilee. Not only is what's happening allowed, but written into the rules and is expected behavior. They've nearly killed the economy and are going for the coup de grace while telling everybody how wonderful things will be when dogs and cats are living together in official, government approved ghetto's......
Do you really think the folks who built this global empire of debt are just going to walk away from it? They will forgive the insiders, but it wouldn't surprise me at all if BK laws got re-written somewhere along the way and we went back to something like debt-internment-camps. You know, where you can work off what you owe - at interest.
Regards,
Cooter
debit jubilee for who? only the 1%'ers right?
The FED supposedly has "control" of interest rates but hasn't raised them in over 7 years.
Raising rates would pay savers to avoid risk, and make foolish risk and gambling more difficult.
How then, can the FED's actions be seen as anything other than unethical pumping of the Wall Street Casino?
Well first you need ethics......
Exactly right.
Which is why all this jawboning shit about raising rates is just fucking BS.
ZIRP is forever and they are trying to figure out how to foist NIRP onto the public like a government-human-centipede.
Regards,
Cooter
If you factor in the fees for an insufficiently large savings account vs. the tax breaks for building your building here instead of there, does anybody really know what it pays to save or costs to borrow (or vice-versa) when the interests of the 1% are at issue? I suspect we've had NIRP for at least a decade.
When this guy speaks up and Buffett is sitting on "cash" and hard assets like railroads you know the end is near. Even the believers in corporate capitalism are defecting.
I don't love this guy!
He could have predicted this 5 years ago...he is a scamster....
Only because he is hurting now, he is talking since he is unable to make money for himself or his clients.
Saying that market is zombie was to be said when QE started or AIG and Goldman were bailed out in 2008...not now.
He benefited from the rising American GDP for more than 30-40 years...now that the GDP is down and all companies have been socialised, and he is unable to make money so he cries foul and can see the truth NOW! It's too late for this analysis.
Shame on his mumbo jumbo BS!
All these clowns are talking their books and reading Zero Hedge.
Yep!
Talking books is also ok....because caveat emptor!
But they are crying like sissies because they cannot make money for their clients (which was purely made out of rising American/global GDP, not being extra smart) and are losing every shred of credibility which they never had! A smart person would make money regardless of GDP and Govt bail outs and would be able to see the future better than anyone else.
The biggest contributor to global GDP rise has been China for the last 5 years and more.....hence Gross cannot make money because he is not allowed to invest there.
http://www.economist.com/news/economic-and-financial-indicators/21654018...
The Amish respect Mr. Gross. He can make money son, he's proven that time and again.
Read my comment below, Amish!
And you will soon feel enlightened!
No one likes a person when they lose money...which is what Gross has been doing for the last 4-5 years!
If Amish love their money, then send them to me....I can do a better job of making them money in a safe manner!
And if Gross is so great then why is he struggling and cannot figure out why he cannot make money? ...and invoking God!? ...hahaha
Ban Dubai! Probably drunk banker, what time in Dubai now?
It's 5 in the morning! Only couple of wines have finished.....group sex is going to follow shortly!
Why you want to ban me?
Amish are not supposed to be on the internet, in the first place, what are you doing here?
What was the real reason for his departure from PIMCO?
The reason for his departure from PIMCO was because he has an EGO the size of PLANET EARTH!
He fought with El Erian and made him depart from co CEO position and then had a fight with his board being Allianz in Germany who wanted to kick him out. As far as I know, no one followed him from PIMCO which shows what kind of 'legend' he is!
He went begging for a job with the new bond king...Jeff Gundlach at Doubleline who did not hire him because of his ego, since Gross wanted to take the senior most position possible and obviously why would any successful person give that to Gross that too in a firm created by himself and as successful as Doubleline.....where Gundlach had hundred plus people follow him when he started Doubleline couple of years ago. http://www.forbes.com/sites/schifrin/2014/11/05/jeffrey-gundlach-king-me...
Then Gross looked around until he found Janus who could hire a 71 year old and 'has been' bond guy!
Janus had nothing to lose...they barely had a few million to manage....
Gross was actually caught at Janus within 3 months of joining because he transferred USD 700 million of his own money from his broker and claimed that clients were following him with lot of assets. gross 700 million janus own money
He was never a guru!
He got the benefit of interest rates declining all the way from 18% to zero! And bonds ALWAYS went up since Volcker and then Greenspan and then Bernanke were in control for almost 30 years and created the MASSIVEST bubble possible which MUST blow apart and when THAT happens, man, what a fun it will be to see EVERYTHING in the US collapse under the crazy multi trillion dollar debt bubble!
A monkey could have done the same job and had better results because a monkey would not have had a bias and would have thrown darts all over the map and enjoyed riding the ever declining rates until they hit ground ZERO about 5-6 years ago!
And since then...Gross has been unable to make money and not only lost his job...but PIMCO and every USD bond fund has been in trouble.
Except, of course in China!
Look at this fund that invests in China bonds and has risen every year for the last few years since inception in 2010 and provided better returns than any USD bond fund. http://www.bloomberg.com/quote/FULLFIC:KY
Even the USD version has gone only one way that is UP! http://www.bloomberg.com/quote/FULLFIA:KY
All this is because Chinese interest rates are still going down and hence all bonds or bond funds will generally go up unless an individual company is in distress and hence a fund is a better option to invest and safely park some of your money just like the good old days in the US.
But Gross.....he cannot invest in China so he is in trouble!
Good grief... At 71, why can't he just buy an island or something...? Larry Ellison Bought an Island in Hawaii. Now What?
"As he previously warned, when the central bank manipulation is removed the likely trajectory of prices is downward..."
The Problem, Bill, is that 'removal' comes about not as a casual academic exercise, but as an emergency act to stem the acute demise of confidence by outside 'participants' who decide they've had enough.
"nor the continued downward push of unemployment to 5%"
Ha! If you think the markets are manipulated, you haven't met the Dept of Labor's statistics!! 5% my ass.
he rambles.............
Bill Gross, stick to what you are supposed to be good at: riding for thirty years a bull market that lasted thirty years
"Protestant litany – spoke to “forgiving our debts as we forgive our debtors”; the other – maybe a more traditional Catholic influenced version – substituted “forgive our trespasses as we forgive those who trespass against us.” "
this litany is highly dependent on the country, the language and in some cases even the church or see. and in both protestant and catholic churches, the differences can be very, very big
example: recently the Pope was presented with a strange mix of a cross and a "hammer and sickle". it came from a South American country. it would be inimaginable for let's say a Polish cardinal to show up with such a present
Christianity is huge, and has many, many facets. In some places, I hear, Jesus holds weapons and shoots with them. In others, this would be seen as very strange indeed
Given that the vast majority that is called Christian by name has nothing to do with the Christ of Scripture and therefore is NOT Christian..your view is shared by many, if not most. It is true that "the natural man cannot understand the things of God because they are spiritually appraised" (i.e. judged guilty).
When I want me some Real Jesus, I always go to the snakes and banjo music Church.
Them folks is putting their faith on the line. No games.
"There ain't no fakin if yer snake shakin."
I prefer Aretha's version.
What a profound misunderstanding of prayer Mr. Gross has. But I'm not getting into a religious or even spiritual discussion on ZH.
I'm just saying this explains a lot about him.
And, by the way, what is this dude's obsession with death? It's in every damned article he publishes. Did he just find out somebody spiked his coffee with a plolonium tablet?
age. increases the subject's understanding of mortality
I would say we should all be very thankful that there is no known way for old men to exchange millions for years of life with younger men
if something like this ever happens, a small tip: nothing is so much worth as another year of life. time is the ultimate currency, the ultimate wealth
children are nothing else then a kind of indirect exchange for more life
They made a movie about that a few years ago.
That is one perspective and has a measure of truth. Your view on children is profound in the sense that without the knowledge of the spiritual Hope that is Christ, then what is really the point?
-------------------
However, as the Apostle Paul stated so accurately, he would know, that to live is Christ and to die is gain..it really is a win-win with the Lord. The older I get the more I look forward to physical death. I just wish the entire world would leave the family of Satan and be adopted into the family of God, for it is written that all belong to one or the other. Furthermore, it is written that all are either slaves of Christ or the world, self & Satan...I find that to be obvious. If one looked up the definition of Freedom, they would find that no one has EVER possessed it and on the contrary; all are enslaved or slaves by definition. Freedom sounds much better.
The best thing that could happen is for the market to decrease in value slowly. No crash. This way the market could act like a true market and no unnatural "propping up" of the market by the government or the Fed Reserve would be needed.
We are way past that; and the judgment of God is already upon this nation...so it will get much much worse or another way of putting it "we haven't seen anything yet". But God in His kindness has given the way of escape for each individual.
"There is no statistical reason per se for the Fed to raise interest rates"
How about a fucking moral reason?
The FED and morality do not coexist do they?
morality does not exist within any corporeal entity.
He has perverted the God of Scripture and has a god of his own making; just like most. The simple truth is that if everyone submitted to the Lordship of Christ; we would not any of these crisis, but as we are told and I find to be true..."man is born to trouble as sparks fly upward".
--------------
What happens to all the minority laws when the skin color of the minority changes? Oh here is how the Census bureau spins it; note the language. "The Census Bureau forecasts that the U.S. will become a minority-majority population for the first time in 2043, according to its first set of new population projections based on the most recent 2010 U.S. Census,.." - spoken like true politicians.
http://www.kappit.com/img/pics/201503_2156_hafgg.jpg
So Gross is admitting that the US Corporation is a Zombie in itself...welcome to our world asshole.
In other news Rumor: Walmart - 1,000 Layoffs Coming
...and Walmart is reducing its hours at ~64 locations:
http://www.katv.com/story/29654431/wal-mart-eliminates-24-hour-operations-in-64-supercenters-list-could-grow
Speaking of zombies, I've yet to see the Tylers do an article about the massive recall in India of Nestle's Maggi's noodles due to high lead content.
The hugely popular Maggi noodles were found to have seven times the allowable lead levels.More than £32 million of noodles are set to be destroyed following safety concerns that they contain unsafe levels of lead.
What is truly priceless in Nestle's spin on this.
Start here: http://www.nestle.com/aboutus/ask-nestle/answers/maggi-noodles-india-msg...
Click on the box with the words: "Why is there lead in MAggi noodles?"
Lead occurs in the earth’s crust and is present in air, soil and dust. The CODEX Alimentarius standards are a key reference for Nestlé. We test lead levels in our raw materials and source ingredients from regions with the lowest levels of lead.
The authorities have also set firm limits to ensure that any lead present in a finished product are within recommended food safety levels and safe to consume.
We regularly monitor all our raw materials for lead, including testing by accredited laboratories. These tests have consistently shown lead in Maggi noodles to be within safe limits. In addition to testing both raw materials and finished products for lead, we carry out extensive research on lead and contribute to global efforts to assure safety in this area.
Food safety is Nestlé’s number one priority. We do more food testing than any other entity in the world and have many stringent controls to guarantee safety: starting from the raw materials we use, throughout processing to packaging. We adhere to the same quality standards wherever in the world we operate.
Standard Disclaimer: Dear Paul Bulcke, You fucked up, you got caught. Deal with it.
Bill is lucky he doesn't work for the WS Journal.
Shemitah,...4th turning......2015.75..........BIG BANG.......bitchez !!111
No Jews, no Shemitah.
Can we have a translator? Have you even read the Scripture? Do not answer that please.
The big zombie in the room is that dumb nigga in the white house
Since Monica Lewinski did the tube steak boogie on William Jefferson Clinton under the desk, in the Oral Office, the 'White House' has been re-named to the 'Whore House' in recognition of Monica's contribution to American historiography.
Who cares about zombie corporations when you have a zombie government that eclipses them all.
ha-ha there should be a remake of madonna's like a prayer video starring Bill Gross
Does anybody else have the hebe-jebes?
[crickets]
Ok! So shut-up Morice!
...I like to move-it...
Bill Gross just figured this out NOW? No, he knew it all the time, but he was too busy making money of dropping interest rates for the last 30 years to care.
when you cant lower rates you restrict credit then let the market raise rates for you. and you can restrict credit while providing ample liquidity, you just need to target the correct metric. one way is to increase the reserve requirement (again) this also gives the public a false sense of security. with ample liquidity (ZIRP at the REPO window) and rising rates, because of tight credit, the banks can borrow and lend and make a tidy profit. those paying to borrow money may not find stocks are quite as good a deal, but certainly Nasdaq and others on spec, maybe even gold will still benefit. there is some chance that putting the pinch on consumers might not play too well in the beltway, but with employment rising the working class can afford it. (hahaha)
Amen.
Dimon to Yellen:
Re. Greece: This is going to hurt a little.
Re. China: I think your going to need a bigger boat.
The directors of the BIS are the world's most important Central Bankers.
Why does the BIS have to put out reports to tell Central Banker's what to do?
Surely a meeting would be the normal thing to do.
What sort of schizophrenic organisation is the BIS?
OR
Bill Gross:creative destruction destroyed, dead companies walking, new growth stifled
ZorCo
One wonders if Bill knows how the shell game really works.
It is amazing, but most people think the game is basically honest, you just have to watch carefully. What they don't realize is when the 'sharp' is done, the pea is not under ANY of the shells. It doesn't matter which one you pick, there is zero chance of winning.
To run the game you have to be able to switch the pea from shell to shell without anybody seeing. More importantly you need to be able to 'palm' the pea, then the drop it back in just as you pick a shell up. Of course, you let people win sometimes to keep them going, but the game is perfectly rigged.
Now that's a good metphor for the modern finacnial 'markets': There's no way to win because there's nothing there.
"... a growing cast of contrarians, such as Jim Bianco and CNBC’s Rick Santelli, can convince the establishment that their world has change."
Rick Santelli Gets it....it's the other MSM sled dogs on Obama's leash that are too stupid too think for themselves or too realize there is no improving economy....guess it'll have to hit them in the face when they're fired for bad ratings.
Two slips: BIS stands for Bank for International Settlements, and if Gross is refering to the Vice Chairman of the Fed, it is Stanley Fischer (with a "c"), former Chairman of the Central Bank of Israel. Otherwise an excellent piece of work, IMHO. In other countries, and in other times, low interest rates and monetary easing have resulted in speculation and stock market inflation rather than job-creating investment. Someone is not doing his homework. The massive use of stock buy backs is a relatively new phenomenon. In more serious times, the use of treasury stock by corporations to influence the market price was frowned upon, and attempts were made to make it illegal. Corporations over a certain size need to be required to have Federal charters (under the interstate commerce clause of the Constitution), and this kind of behavior prohibited.