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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ZeroBoBo's picture

The thing is, because of the sheer size of the U.S. economy and lack of an "immediate" alternative reserve currency, I don't think it will do much harm. That said, if the U.S. was the size of Denmark, the debt would be selling at $0.30 to the dollar...

Sometimes, bigger is better, and not only for fat cat, overpaid CEOs...

Die Weiße Rose's picture

very well said ZH

it is important to remember that Zirp, Twist and Tweak

does not represent a healthy Economy.

I am still waiting for the Age of Enlightenment -

Just because Bernanke says "there is no Inflation" does not mean there is no Inflation. Just look at your Food and Energy bills and your gas or Fuel bills and the cost of living, and compare that to your income.

I think that there is actually inflation of Commodity prices, caused by Bernanke's devaluation of the USD, which is closely linked to the 10 year Bond yield which stands at a lousy 2.19% for 10 year US Government Bonds.

But the public sees none of these cheap Loans, nor do Corporations who pay very high rates like 10.11% to borrow money .

So what Bernanke is doing is trying to Twist and Tweak Rates,short-term and Long, to give signals to the markets, in the US but also in Europe, that it is o.k. to borrow and take on more Debt to grow further and get the economy going.

But who wants to borrow at these rates ?  Everyone has gone super conservative. I could have bought a Property last year at an absolute bargain in the middle of Sydney, but i would have to take out a Loan with a Bank. With things being so uncertain

and having been free of Debt for 3 years now, I just did not want to be fucked over paying Interest to a Bank yet again, so I let it go, but I know I have lost out on an eccellent bargain.

Truth is, I have no trust whatsoever in this economy and in People like Bernanke or Geitner or the IMF or the ECB or any "Investment Banks " for that matter. All they want to do is take your cash and assets and then use everything against you,

as soon as you take on Debt. I have bought a property in the 90th in Sydney on the harbour, took out a loan and payed it off over 10 years. My Rate then was 16 %, but my Job was secure and I was 20 with a good income working in Advertising.

Things have changed so dramatically. No-one has Jobsecurity now! So how can you take out a Loan and take the risk of maybe losing it all ? How can you even start a Family with the cost of things?

The reason why I am doing well is that I made a decision with 40 that I did not feel secure enough to have a decent Life-style while at the same time taking care of a wife and Kids. I did the figures and I just could not do it. And I consider myself a pretty smart guy, I have done well, and I have taken many risks in my life but I just never had the guts to have a family or put kids in a World where everything is just set up to fail and to be exploited or enslaved.

I did not want my kids to grow up in a world where there are no more values left, but only inflated Prices and bills to pay.

In the last 20 years this world has changed dramatically for the worse. It has become cut-throat and savage.

People like Bernanke really believe that they are doing an excellent Job. But there are millions like me, the world over who know the real story, we know the real economy and the rates and costs we pay for shit, we know what real life is all about.

I admire people who are brave enough to have a family like my Mother and father did in Germany after WW2.

times were tough then too, but they were building something again after years of nothing and they found real joy and value of Life in every simple little thing, like a sunset or a walk in the park or going to a dance.

What has happened to real value in this world ? to real quality of Life and love and pride in the things we do ?

I always believed that we are creating heaven or hell right here on earth...

but this world looks more and more predatory and dangerous to me.

This is a world where the innocent become ensnared and addicted and enslaved.

This is a world where a young kid with dreams in their eyes can lose their soul and end up with a syringe stuck unconcious in some gutter. The difference between the average person and a derelict is a Job...but no-one is safe anymore.

tomorrow all your dreams could turn into a nightmare, and most of us know that.

that's why this system has to totally collapse before there can be a renaisance, a rebirth, a new beginning,

a new age of enlightenment.

written in a rage by wr;)

Don Birnam's picture

Very fine commentary, sir. Eloquently put. The unenlightened despots who hold power will cling and grasp to the very end. It may be a very long time before another Enlightened Age dawns. There is much to unwind.

Caviar Emptor's picture

Fed's 40-year plan (since 1971) simply drove a wedge between the "real" economy and the "paper" economy. They believed one could lead the other. But that's like saying that if you smoke enough dope the world will smile with you. Biflation grew out of the booming growth in the paper economy which happened along side the withering of the real economy. The middle class is caught in the, well, middle. Doing a split trying to keep one foot in one and the other foot in the second

High Plains Drifter's picture

gee, what a gutsy call...........

SheepDog-One's picture

Yea real prescient, WTF Bill Gross is the new Nostradamus! In an obvious world economic crackup, he predicts '0 growth'? Wow real ballzy call!

disabledvet's picture

What else do you want from a bond guy? James Bond? He has nothing but doubts there too. I imagine he see's this sudden equity surge and goes "WTF?!" Whatever happened to "holding to maturity"? I imagine Wall Street of the West thinks just like Wall Street of the East: "how quaint!" Again "just pass the Poupon" Mr. Zero Coupon.

Ultros88's picture

Hey looks its a ||FaT MMaN|| clone. Gee Bill is really pretty Gross, isn't he. What's his net weight...  oops I mean net worth, again? Maybe our friend Bill is projecting 0% growth because he can't see beyond his bloated wallet.


Shut down the money market sweeps in your account. Don't feed the beast... It doesn't give anything back.



devo's picture

I can't wait to watch Mad Money tonight.

"Buy!" "Buy!"..."Buy!"

Pure lolz

PulauHantu29's picture

Negative real growth is more accurate imo. Negative GDP growth at least through 2012.  If the dollar strengthens (such as if the euro drops to parity) my guess is you will see -2.0% or worse GDP growth with higher unemployment numbers.

And oh, yes, last time I looked John Williams was shwoing over 6% inflation.

Biflation is what some call it here on ZH.

Remember, seems like as long as the Bankers get their Mega-Bonuses, nothing else matters in this economy.


Atomizer's picture

Geithner: US To Play "Very Major Role" In Helping Europe


Rolls back the hands of time.. 

Mr. David Lipton assumed the position of First Deputy Managing Director of the International Monetary Fund on September 1, 2011. He served as a Special Advisor to the Managing Director of the International Monetary Fund starting July 26, 2011 before assuming his duties as First Deputy Managing Director. 

Later today.. 

Geithner: will prosecute myself for all illegal infractions - LOL

Round up.. 

" Geithner said that using U.S. tax dollars, through the IMF, to shore up Europe was appropriate, but he stopped short of suggesting that the U.S. give more money to the IMF or commit U.S. funds to the problem directly" - OK Timmah, we believe you. 

Sept 26 - Daily Wrap, David Lipton Talks about the 2011 Annual Meetings 

My high tax bracket should deliver better propaganda tales..

falak pema's picture

Geithner: US To Play "Very Major Role" In Helping Europe

Thats why he has just said that increased IMF funding of EFSF complimentary facilities will be curbed by USA. 'They have to get their act together first'... Hows THAT for coherent reasoning. Whats going on behind the curtains in not just illogical, I'm sure its truly ugly, Oligarchy at play...beggar thy neighbour...race him down to hi-stake poker all the way to the precipice...and who knows...even beyond!

zorba THE GREEK's picture

I'm a Phillies Fan. They had the best record in baseball followed by the Yankies.

Both teams are out of the play-offs in the first round. Shit happens. Paulson crapped 

out this year and so did Bill Gross. That just goes to show you how illogical the markets

have become. I've have been holding physical PMs for 10 years now and I am up every year

for a total of over 400%. Am I an investment genius? Hell no. I was just too afraid of losing

everything, so I figured PMs will always have value and kept blindly adding to my position

by accumulating. So it turned out that a distrust of every paper investment by owning physical

PMs was the best investment strategy for the last 10 years. Who would have thought that?

Will fear be the best strategy going forward? Who knows? But under the present world

circumstances, I'm sure as hell sticking with it.

broke433's picture

This guy sucks, when he was shorting everyone went long 2x leverage and now that he has gone long everyone is shorting.

Grand Supercycle's picture

SP500 / DOW daily charts remain choppy but bullish.

A reminder that SP500 / DOW weekly indicators now give bullish warning. If confirmed, it suggests significant equity rally this year.

Importantly, monthly charts remain bearish.