Bill Gross Issues "Mea Culpa" Sees 0% Growth For Developed Economies Over The Coming Quarters

Tyler Durden's picture

By now it is no surprise that Bill Gross has not exactly "caught the inflection points" in the market in the past year. Of recent note, as Zero Hedge first reported three days ago, in September he massively extended the duration of his holdings in an attempt to catch up with Operation Twist just in time for the 30 Year to have its biggest drop in quite a while. Which may explain why he has released a letter to investors titled, simply enough, "Mea Culpa" in which he essentially apologizes for underperforming the market, when he says "I am having a bad year". That's fine, and so are your clients. But what is far more troubling Bill, is that your corporate parent, Germany's Allianz, as is now well known is the entity pursuing the conversion of the EFSF into a multi-trillion "insurance" fund to backstop even greater trillions of corporate and sovereign fixed income exposure. Please tell us Bill that this is not your doing: that it is not your "influence" that has been upstreamed to corporate, and is forcing Europe's taxpayers to foot the bill for your, and others', "bad year." Because while everyone can make a mistake, those of us who are not too big to fail, read manage $1.2 trillion fixed income portfolios, get punished for said mistake. It is far more reprehensible when you come crawling to the same taxpayer and engage in the same activity you so loudly complain about in every single letter (there is a reason why the broader population has grown to loathe Warren Buffett). Anyway, with that aside, here is what Gross sees as happening in the future: "So where do we go from here? Our internal growth forecast for developed economies is now 0% over the coming several quarters and the portfolio more accurately reflects this posture." Well, while Pimco may have been spot on 10 days ago with this assessment, the subsequent 10%+ short covering squeeze has forced a dramatic sell off in the 10 Year (the 10s30s has flatten substantially in recent days). And naturally, in this world in which effect implies cause, the moves in the market now are taken to represent an avoidance of the recession. Granted that makes absolutely no sense, but such is bizarro world. So our only question is - did Gross just jinx the recession out of existence?

Full letter:


h/t Dealbreaker

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jimmyjames's picture

Today, you could contract the money supply to zero and still have inflation.


The money supply in cash-cannot be deflated-the printed dollar is always somewhere-

You can stop printing but you cannot contract what's already there-

Credit is a different type of money supply-it can be expanded (Inflation) as we've seen and it can deflate in cloud of smoke-like we've seen-

cranky-old-geezer's picture



You and your theory are full of shit.

"Biflation" would mean inflation twice in a time period, like "biannual", not inflation and it's opposite.

On top of that, "inflation" has to do with the money supply, not prices. The money supply cannot be growing and shrinking at the same time.

Only morons like you use inflation / deflation to describe price changes.

There is no one word in the English language to describe price changes up nor down. Hence "rising prices" and "falling prices", two words.

Nobody says "stock XYZ inflated 3 points today" nor "stock XYZ deflated 3 points today". They say "stock XYZ rose 3 points today" or "stock XYZ fell 3 points today".

What you describe as "biflation" is not new, and you have no "new theory". It has occurred in the past. Expanding money supply in an economic depression characterized by severe demand collapse causing prices to fall overall, what's happening in residential real estate. Home values have dropped around 40% since mid 2007 while the money supply has grown around 35%, roughly offsetting each other, leaving home prices stagnant or slightly dropping (not "deflating"). Without that 35% money supply growth (true inflation) home prices would be down 60% or more.

If home prices fell 60% the real estate market would simply crash. Bernanke has been trying to keep real estate prices from falling 60% by expanding the money supply rapidly, softening the real estate price drop in nominal terms, but at the same time causing prices of commodities not experiencing severe demand collapse to rise rapidly, like gold and silver ...and milk and eggs and bread, etc.

Schmuck Raker's picture

Precisely my thought.

And, I'm staying out of that guys yard.

Caviar Emptor's picture

Clearly you don't get it. Congratulations! You're in ignorant bliss. That can be a blessing, good for you. In the short run :-)

cranky-old-geezer's picture



Oh, so you're in the "it's different this time" camp.

Nothing is different this time.  All this stuff has happened before in varying degrees.  It's just more intense this time.

A "perfect storm" is not some new kind of storm.  It's just way more intense.

Caviar Emptor's picture

The continent of Pangea once existed, and ceased to exist becuase of plate tectonics. Neanderthal man ceased to exist. The DoDo bird, T Rex, the Caspian and Java tiger too, and the California condor almost ceased to exist if it hadn't been saved. Monarchies have died, empires have crumbled, religions have become extinct, mighty volcanoes have too

Some changes come along that are game-changers. 

And all economic theories have a life-cycle: they emerge when the old ones fail, they have a heyday and then they too fail, get discredited and get replaced. Because the world never stops changing. Change is the constant. You can't feel yourself spinning through space but you are. And you can't always see the giant changes as they are occurring until after they become more obvious

cranky-old-geezer's picture



We're not dealing with bullshit economic / monetary theories here you fucking moron.  We're dealing with economic / monetary FACTS.

FACT:  Price collapse in a collapsing real estate market IS attenuated by expanding the money supply correspondingly.   Exactly what Bernanke has been doing. 

FACT: Bernake couldn't care less about the real estate market.  He cares about maintaining book values of real estate paper held by banks so the fucking banking system won't crash. 

FACT:  It's why they went to mark-to-myth accounting as well.  Trying to maintain book values of financial paper while the underlying physical assets collapse in value, creating a widening gap between the financial sector and the real economy.

FACT:  Without Bernake's 35% money supply expansion ...going to criminal bankers and our criminal government incidently... the financial system would have imploded by now, we would have hit the proverbial "reset" point, and we'd be in true recovery now ...unless our enemies around the world (of which there are meny) decided to take advantage of the opportunty and take America down once and for all. 

So far you have cited NO facts about the current situation, merely engaging in vague generalities ...exactly what those criminal Wall Street bankers do ...and our criminal government.  Vague generalties to placate the stupid sheep out there ...and hide the fact that they don't know what the fuck they're talking about you.

cranky-old-geezer's picture



Corrections:  Home values have dropped around 50% since mid 2007.  If Bernanke hadn't expanded the money supply 35%, home prices would have dropped correspondingly, around 50%, not 60%.  But 50% would still precipitate a real estate crash ...and crash the banking sector along with it.

LongBalls's picture

Long commodities. Short emerging markets.

ElvisDog's picture

No. The term "Recession" has simply gotten more complex.

No, you're wrong. It's really very simple. A good part of the "growth" we've all enjoyed over the past 30 years has been fueled by two things: cheap oil and pulling forward demand by issuing debt at 2X (or so) the rate of real economic growth. Those two dynamics have reached the end of their rope and that's why we're in recession. That's also why there will be no "recovery" in the sense of resuming the previous growth profile but rather a re-set to a lower level of prosperity.

SheepDog-One's picture

Thats a good comment right there.

Caviar Emptor's picture

I agree, but what you're saying shows that it is more complex in the sense that it's a "non-traditonal" way of looking at it. When you say "recession" to the average Chicago U-trained monetarist, what they see is a classic post-war business cycle recession: supply outstrips demand, costs rise to unsustainable levels and need to correct. But ultimately to them it's a very simple cycle, a pendulum that just swings back and forth.

That was all true when the system was in equilibrium, which it's not anymore as a consequence of a build up of forces over the past 4 decades of money printing, but also shifts in the global economy, demographics and natural resource allocation. It ain't as simple as they'd like it to be and that's why their policies are making things worse. 

Atlantis Consigliore's picture

hes like Cramer, a fade, always was a fade,  


fade him on bonds, fade em on stocks, (when he bt stocks short)


every one a fade,  open up your pie hole either of you and say.


BI BI BI,  lol..... a fade.   

SheepDog-One's picture

Nah not like Cramer, he's more like another domino falling from optimism, or even thinking he can play this rigged market within a depression. 1 by 1 theyre capitulating.

baby_BLYTHE's picture

it is a shame (on their part) billionaries like Gross continue to doubt gold despite all the money that has been printed worldwide, 0% interest rates, debt/gdp ratios 90%+, unfunded liabilities, continued government intervention in the economy with keynesian stimulus programs, never ending war... I could go on. 

Continuting to doubt the fact we are not only at the end of a economic era of phony leveraged growth, but the end of the entire dollar world reserve monetary system will continue to smack the portfolios of these so-called equity/bond Titans

X.inf.capt's picture



buzzsaw99's picture

Gross just thinks he had a bad year in 2011. He will be looking back upon the past few quarters soon and regarding them as "the good old days".

buzzsaw99's picture

when the last bond bear capitulated.

SheepDog-One's picture

Yea well buzzsaw a whole LOT of people will be looking back on today (in a couple months) thinking 'wow those sure were the good ol days'.

AngryGerman's picture

blackjack bitches, blackjack.

mjk0259's picture

Crap, could the CCP run someone in our elections please...

mynhair's picture

Zero seems high for the retarded, errr, developed  economies.

JustObserving's picture

"Lots of safety in treasuries"??

It took 205 years to accumulate $1 trillion in US debt and now we are adding $1.7 trillion a year in new debt and about $6 trillion a year in unfunded liabilities.  And US treasuries are the safest investment - because they are backed by the Fed and gold and silver are backed by nothing.

The world has always been insane - just more so now.


reader2010's picture

What's wrong with ZERO growth anyway? Fuck those perpetual growth motherfuckers.

mynhair's picture

We need massive tax increases to spur growth and support the war in Uganda.

We now know what half darkies are capable of.

knukles's picture

So how amny wars do our fearless one have us in now?
Uganda (plus 2 others where the buffalo roam)
What am I missing?
Well glory fucking be, by this count it's at least 4 more than under that vilified predecessor warmonger.

Arkadaba's picture

Imagine if the US gov brought home all those service men and women to this shitty economy. Now that would be an OccupyAmerica movement.  And you forgot Libya.

Both parties have fed the war machine.

bbq on whitehouse lawn's picture

Bill Gross should turn over his full year income to ZH. Because ZH was right and Bill was wrong.

Or Bill could just buy gold with his OPM and be right for the next year.

Bill is old stupid and most importantly WRONG.

Being wrong should lead to death. If other people or animals are wrong, guess what they die. So should CEOs. But that since we are a civil people he should just lose his earnings, income or other money for this year.

Face it Bill you are stupid, and if nature had her way you would be rightfully dead.

Oh thats right you will be soon, nature wins you lose again.

devo's picture

Bill Gross is correct, but there could be the illusion of growth due to (a) inflation/hidden inflation (b) cooked books and (c) falsified government reports.

I write this knowing full well I just made myself sound like a gun-toting conspiracy theory hick straight out of Deliverance.

SheepDog-One's picture

Yea we've been running on illusions for a few years now, problem is someone has to pay now.

Don Birnam's picture

...Just as long as you don't end up like Ned Beatty. Best stay away from that river.

ElvisDog's picture

Dear Bill Gross,

On behalf of the 99%, let me just say "FUCK YOU".

Josh Randall's picture

Wonder whom else is going to apologize...Greenspan anyone ? A former All American Gold Bug turned bubble buiding and popping machine whom handpicked the Bernank

knukles's picture

Wait for his book....
All rememberances will be that he was a major motherfucking hard currency guy but the presidents, congress, all the other central bankers pulled the wool over his eyes and if they hadn't tricked him, all would be well in the land of Skittle shitting Unicorns.

navy62802's picture

These people who continue to lean on "traditional" economics and trading strategies are going to get royally fucked. It's already happening and we haven't even hit a black swan yet.

AngryGerman's picture

"traditional" economics and trading strategies

...nth else than a feeble attempt to mass-market markets. there is no tradition economics that pays off.

SheepDog-One's picture

Definitely, thats why I discount anyone out there projecting where the market is going and when. 

ZeroBoBo's picture

What's happened to the world's greatest bond fund?
Pretty darn simple: Paul McCulley left last year is what happened! woocoodanode he was the real brains behind the bond strategy?

Well, we did!

They are a bond fund and they don't see how austerity is about to his us right in the face with the wind-down of the ARRA and all its transfer money to states, municipalities and the unemployed? Mea Culpa is too nice.

Now FFS, Biflation? come on LOL

AngryGerman's picture

girls gone wild: the biflation issue!!!


and as i said before: gross = blackjack


Caviar Emptor's picture

lol. What about boobflation? If CNBS is a barometer, we clearly have been inflaitng for quite some time. 

Everybodys All American's picture

I just wonder when Moody's or Fitch decides it's time to downgrade the US debt and whether the US Treasury will hold up as well as it did under S&P's downgrade. My hunch is the outcome will be far different and being short US Treasuries going into that occurence would seem prudent. Would love to know what Gross thinks of that hypothesis.

AngryGerman's picture

uuuhhhh, downgrade. now i'm scared. like that gonna happen. world reserve crncy is not allowed to be downgraded. but the day will come.