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Bill Gross Turns Deflationist 90 Days After Worrying About Inflation

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http://finance.yahoo.com/banking-budgeting/article/110234/defending-yourself-against-deflation;_ylt=Anf7.WtCZJkw6O1P4WC.jJm7YWsA;_ylu=X3oDMTE1am1tbjl0BHBvcwM3BHNlYwN0b3BTdG9yaWVzBHNsawN0aGVjdXJyZW50ZHI-?sec=topStories&pos=5&asset=&ccode=

Defending Yourself Against Deflation
by James "Jimmy" Stewart
Wednesday, August 4, 2010
The dreaded "D" word is back in circulation, and I don't mean "depression." Having skirted that potential calamity, the worry for policy makers and investors now is deflation.
On the face of it, deflation -- falling prices -- doesn't seem like it would be so bad. Who wouldn't welcome discounts that just keep getting better, like those sales at Filene's Basement where prices got lower the longer merchandise stayed on the racks?
Of course, who knows what it really feels like, since most of us have never experienced prolonged deflation in our lifetime..../
But the truth is, I don't know. I don't think anyone does. On Sunday, The Wall Street Journal reported that some major investors, including
Pimco's Bill Gross, are taking the risk of deflation seriously and adjusting their portfolios accordingly.
Like many investors, Mr. Gross and his colleagues were focused on the rising risks of inflation just three months ago. They have spent their entire careers studying these issues, and I have a healthy respect for their opinions.
Recent price data support them. The headline consumer-price index slipped 0.1% in June after falling 0.2% in May.

Inflation is like toothpaste, hard to get back in the tube once you have squeezed it out.

Deflation, on the other hand is like super glue in a tube with a hole in it. Nothing can stop it shrinking.

Edited by Realistbear

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http://finance.yahoo.com/banking-budgeting/article/110234/defending-yourself-against-deflation;_ylt=Anf7.WtCZJkw6O1P4WC.jJm7YWsA;_ylu=X3oDMTE1am1tbjl0BHBvcwM3BHNlYwN0b3BTdG9yaWVzBHNsawN0aGVjdXJyZW50ZHI-?sec=topStories&pos=5&asset=&ccode=

Defending Yourself Against Deflation
by James "Jimmy" Stewart
Wednesday, August 4, 2010
The dreaded "D" word is back in circulation, and I don't mean "depression." Having skirted that potential calamity, the worry for policy makers and investors now is deflation.
On the face of it, deflation -- falling prices -- doesn't seem like it would be so bad. Who wouldn't welcome discounts that just keep getting better, like those sales at Filene's Basement where prices got lower the longer merchandise stayed on the racks?
Of course, who knows what it really feels like, since most of us have never experienced prolonged deflation in our lifetime..../
But the truth is, I don't know. I don't think anyone does. On Sunday, The Wall Street Journal reported that some major investors, including
Pimco's Bill Gross, are taking the risk of deflation seriously and adjusting their portfolios accordingly.
Like many investors, Mr. Gross and his colleagues were focused on the rising risks of inflation just three months ago. They have spent their entire careers studying these issues, and I have a healthy respect for their opinions.
Recent price data support them. The headline consumer-price index slipped 0.1% in June after falling 0.2% in May.

Inflation is like toothpaste, hard to get back in the tube once you have squeezed it out.

Deflation, on the other hand is like super glue in a tube with a whole in it. Nothing can stop it shrinking.

mr gross trying to offload some dodgy bonds methinks

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http://finance.yahoo.com/banking-budgeting/article/110234/defending-yourself-against-deflation;_ylt=Anf7.WtCZJkw6O1P4WC.jJm7YWsA;_ylu=X3oDMTE1am1tbjl0BHBvcwM3BHNlYwN0b3BTdG9yaWVzBHNsawN0aGVjdXJyZW50ZHI-?sec=topStories&pos=5&asset=&ccode=

Defending Yourself Against Deflation
by James "Jimmy" Stewart
Wednesday, August 4, 2010
The dreaded "D" word is back in circulation, and I don't mean "depression." Having skirted that potential calamity, the worry for policy makers and investors now is deflation.
On the face of it, deflation -- falling prices -- doesn't seem like it would be so bad. Who wouldn't welcome discounts that just keep getting better, like those sales at Filene's Basement where prices got lower the longer merchandise stayed on the racks?
Of course, who knows what it really feels like, since most of us have never experienced prolonged deflation in our lifetime..../
But the truth is, I don't know. I don't think anyone does. On Sunday, The Wall Street Journal reported that some major investors, including
Pimco's Bill Gross, are taking the risk of deflation seriously and adjusting their portfolios accordingly.
Like many investors, Mr. Gross and his colleagues were focused on the rising risks of inflation just three months ago. They have spent their entire careers studying these issues, and I have a healthy respect for their opinions.
Recent price data support them. The headline consumer-price index slipped 0.1% in June after falling 0.2% in May.

Inflation is like toothpaste, hard to get back in the tube once you have squeezed it out.

Deflation, on the other hand is like super glue in a tube with a whole in it. Nothing can stop it shrinking.

Demonstrably not so - prices will not shrink indefinitely unlike inflation where there is really no limit to how high they can go.

The real reason why [corrected]deflation is so dangerous is that all the over-leveraged banks and financial institutions will be wiped out by it as it only takes a small fall in the value of their asset base to put their books in the red.

That's why we will simply get more money printing, bailouts and financial stimulus whenever deflationary forces start to grow stronger again. Rinse and repeat until we get out of control inflation and sovereign economic collapse.

Edited by Sour Mash

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Demonstrably not so - prices will not shrink indefinitely unlike inflation where there is really no limit to how high they can go.

The real reason why [corrected]deflation is so dangerous is that all the over-leveraged banks and financial institutions will be wiped out by it as it only takes a small fall in the value of their asset base to put their books in the red.

That's why we will simply get more money printing, bailouts and financial stimulus whenever deflationary forces start to grow stronger again. Rinse and repeat until we get out of control inflation and sovereign economic collapse.

Could they really avoid deflation by injecting cash into the banks though.

i watched Newsnight concerning the American unemployed with interest last night.

I began to see what a hole they are in.

To recapitalise America I guess the money has to reach Joe Average, theres 10% not working and there's a whole lot more not spending.

OK they could do that, chuck money at everyone on an ongoing basis, but it involves totally trashing the $.

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Could they really avoid deflation by injecting cash into the banks though.

i watched Newsnight concerning the American unemployed with interest last night.

I began to see what a hole they are in.

To recapitalise America I guess the money has to reach Joe Average, theres 10% not working and there's a whole lot more not spending.

OK they could do that, chuck money at everyone on an ongoing basis, but it involves totally trashing the $.

Try 20%

10% is like saying there are 3 million unemployed in the UK

Edited by Tamara De Lempicka

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Demonstrably not so - prices will not shrink indefinitely unlike inflation where there is really no limit to how high they can go.

The real reason why [corrected]deflation is so dangerous is that all the over-leveraged banks and financial institutions will be wiped out by it as it only takes a small fall in the value of their asset base to put their books in the red.

That's why we will simply get more money printing, bailouts and financial stimulus whenever deflationary forces start to grow stronger again. Rinse and repeat until we get out of control inflation and sovereign economic collapse.

to cure a small fall in asset prices on the books of busted banks, just lie a bit more.

The only inflation around at the mo is the size of the lie.

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Demonstrably not so - prices will not shrink indefinitely unlike inflation where there is really no limit to how high they can go.

The real reason why [corrected]deflation is so dangerous is that all the over-leveraged banks and financial institutions will be wiped out by it as it only takes a small fall in the value of their asset base to put their books in the red.

That's why we will simply get more money printing, bailouts and financial stimulus whenever deflationary forces start to grow stronger again. Rinse and repeat until we get out of control inflation and sovereign economic collapse.

Debt investors don't like inflation - the loans gets paid off in increasingly worthless cash.

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http://finance.yahoo.com/banking-budgeting/article/110234/defending-yourself-against-deflation;_ylt=Anf7.WtCZJkw6O1P4WC.jJm7YWsA;_ylu=X3oDMTE1am1tbjl0BHBvcwM3BHNlYwN0b3BTdG9yaWVzBHNsawN0aGVjdXJyZW50ZHI-?sec=topStories&pos=5&asset=&ccode=

Defending Yourself Against Deflation
by James "Jimmy" Stewart
Wednesday, August 4, 2010
The dreaded "D" word is back in circulation, and I don't mean "depression." Having skirted that potential calamity, the worry for policy makers and investors now is deflation.
On the face of it, deflation -- falling prices -- doesn't seem like it would be so bad. Who wouldn't welcome discounts that just keep getting better, like those sales at Filene's Basement where prices got lower the longer merchandise stayed on the racks?
Of course, who knows what it really feels like, since most of us have never experienced prolonged deflation in our lifetime..../
But the truth is, I don't know. I don't think anyone does. On Sunday, The Wall Street Journal reported that some major investors, including
Pimco's Bill Gross, are taking the risk of deflation seriously and adjusting their portfolios accordingly.
Like many investors, Mr. Gross and his colleagues were focused on the rising risks of inflation just three months ago. They have spent their entire careers studying these issues, and I have a healthy respect for their opinions.
Recent price data support them. The headline consumer-price index slipped 0.1% in June after falling 0.2% in May.

Inflation is like toothpaste, hard to get back in the tube once you have squeezed it out.

Deflation, on the other hand is like super glue in a tube with a whole in it. Nothing can stop it shrinking.

I have never understood why the biggest bond-holding fund would worry about deflation. If I paid X and had say 5% interest then let deflation rip, says I (or is it says me?). Whatever.

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Demonstrably not so - prices will not shrink indefinitely unlike inflation where there is really no limit to how high they can go.

The real reason why [corrected]deflation is so dangerous is that all the over-leveraged banks and financial institutions will be wiped out by it as it only takes a small fall in the value of their asset base to put their books in the red.

That's why we will simply get more money printing, bailouts and financial stimulus whenever deflationary forces start to grow stronger again. Rinse and repeat until we get out of control inflation and sovereign economic collapse.

I agree 100% with your analysis which is why I firmly believe that Gross is leveraged up the wassoo. Otherwise the bond king would be gloating like the proverbial right now. What's a 4% treasury 10 year yield with deflation say, 1% PA? Anybody??

Edited by tomwatkins

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Standard Bill Gross behaviour .... buy loads of USTs on the quiet and then tell people all the reasons why they desparately need to buy loads of USTs so he can offload them for a quick profit. If an investment bank does this its called front-running and illegal but somehow its ok for PIMCO. He has clearly been buying rather a lot of 5y notes recently since the 2y/5y/10y fly has moved to very abnormal levels. He was probably off loading today since the fly is coming back.

Edited by david m

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I have never understood why the biggest bond-holding fund would worry about deflation. If I paid X and had say 5% interest then let deflation rip, says I (or is it says me?). Whatever.

oh, there are the small matters of default, enforcement of claims, counterparty risk and so on.

and here I am just talking about the US treasury.

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To get inflation the ruling elite would have to be willing to get money into the hands of the masses.. say the bottom 98% of the population. But they just are not willing to do that. They would rather have deflation and depression than see money given to the masses.

Thats the big reason I've always been in the deflation camp. Yes technically the nation could print money and give it to all, enough to get out of deflation. But that would involve giving money to average people, which the ruling elite is strongly against.

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bingo!

The problem with this idea is that Mr. Gross has put his money where his mouth is. If you check current holdings in PIMCO's Total Return Bond Fund you will see lotsa Treasuries in there. Mr. Gross has a lot of cred worldwide (he works for a European Bank BTW) and he can only cry wolf twice in an entire career.

Performance & Volatility (PTTDX)

Average Annual Total Returns (%)2 as of 06/30/2010

PTTDX

1 Year 12.98

3 Year 10.78

5 Year 7.11

10 Year 7.49

Allocation Breakdown‡

U.S. Government Agencies 46.3%

Corporate Bonds & Notes 23.9%

U.S. Treasury Obligations 10.9%

Short-Term Instruments 8.1%

Foreign Currency-Denominated Issues 3.6%

Other 7.2%

% of Total Investments

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The problem with this idea is that Mr. Gross has put his money where his mouth is. If you check current holdings in PIMCO's Total Return Bond Fund you will see lotsa Treasuries in there. Mr. Gross has a lot of cred worldwide (he works for a European Bank BTW) and he can only cry wolf twice in an entire career.

its called "talking your book" :rolleyes:

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That's interesting. Which one?

Bill works for the Germans:

http://europe.pimco.com/TopNav/Home/default.htm

Alianz

http://europe.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Investment+Outlook+Bill+Gross+August+2010+Private+Eyes.htm

"I really do have a serious message this month, an adjunct to the New Normal that will likely impact growth and financial markets for years to come. Our New Normal, to repeat ad nauseam, is predicated upon deleveraging, reregulation and deglobalisation, all of which promote slower economic growth and lower inflation in developed economies while substantially bypassing emerging market countries that have more favourable initial conditions. In recent months, Mohamed El-Erian has added a developing corollary that emphasises the lack of an appropriate policy response to what is a structural as opposed to a cyclical development, and you should read his frequently published op-eds for a more thorough analysis as well as those written by Jeffrey Sachs and others who are constructively suggesting a way back to the old normal."

Edited by Realistbear

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The problem with this idea is that Mr. Gross has put his money where his mouth is. If you check current holdings in PIMCO's Total Return Bond Fund you will see lotsa Treasuries in there.

That's because it's a dollar based mutual bond fund. What else would you expect to find in it?

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Allianz is an insurer not a bank.

Its occuring you just dont see it, lower wages for the same jobs, less people working, local and governments cutting its work force reducing wages etc... while the cost of living its rising.

Madness to buy a property now

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Allianz is an insurer not a bank.

Its called diversified holdings. Allianz is the holding company of multiple business with PIMCO being, perhaps, the largest. You will also find that large insurers everywhere "dabble" in investment businesses.

The bottom line is that PIMCO manage 1Trillion and Gross' reputation stands above many others in the field. He was one of a few who saw the *** coming. His bond fund is up 12% YTD. Says a lot IMO.

________________________________

The *** was meant to be "H" "P" "C"--got edited out for some reason.

Edited by Realistbear

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Its called diversified holdings. Allianz is the holding company of multiple business

So still not technically a bank?

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Its called diversified holdings. Allianz is the holding company of multiple business with PIMCO being, perhaps, the largest. You will also find that large insurers everywhere "dabble" in investment businesses.

The bottom line is that PIMCO manage 1Trillion and Gross' reputation stands above many others in the field. He was one of a few who saw the *** coming. His bond fund is up 12% YTD. Says a lot IMO.

________________________________

The *** was meant to be "H" "P" "C"--got edited out for some reason.

I know who Bill Gross is, who PIMCO are, their history and their reputation. I also know the difference between a bank, a mutual fund and an insurer. I try not to mix them all up, otherwise others might think I don't know what I'm talking about.

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So still not technically a bank?

Technically an insurance company that dabbles in investments and things which relate to banks. Technically speaking, not just an insurance company just as Natwest is not just a bank in the sense that, technically, speaking they sell insurance through subsidiaries. All ver technical in other words.

http://www.allianzglobalinvestors.co.uk/en/Pages/default.aspx

Regulation and Status Disclosure
Allianz Global Investors represents products and services of RCM (UK) Ltd (Registered in England No 2014586 & VAT No 244 7335 60)and Allianz Global Investors (UK) Ltd (Registered in England No 1963362). Authorised and regulated by the Financial Services Authority. FSA registration number: 122218 (Allianz Global Investors (UK) Ltd.), 122219 (RCM (UK) Ltd.), both companies have their registered office at 155 Bishopsgate, London EC2M 3AD and are wholly owned subsidiaries of Allianz AG and members of the Allianz Global Investors Marketing Group. Allianz Global Investors (UK) Ltd. is a member of the Investment Management Association. The Financial Services Authority's address is 25 The North colonnade, Canary Wharf, London, E14 5HS. The Financial Services Authority website is at
http://www.fsa.gov.uk.' rel="external nofollow">
Throughout the website Allianz Global Investors (UK) Ltd. and RCM (UK) Ltd. may sometimes be referred to as Allianz Global Investors.

Technically a global investment company that includes Bond Funds that deal with banking instruments and the banks themselves.

Until recently, Allianz were more directly involved in retail/commercial banking through their Dresdner subsidairy:

Allianz (help·info) SE[2] (formerly AG, FWB: ALV, NYSE: AZ) is one of the largest financial services providers in the world, headquartered in Munich, Germany.
Its core business and focus is insurance. With €92.5 billion of revenue during 2008, Allianz is the second largest international insurance and financial services organization in the world.
Allianz has sold Dresdner Bank to Commerzbank, largely for shares in November 2008.[3] As a result of this proposed merger,
Allianz will end up with a 20% controlling stake in the combined Commerzbank/Dresdner.
Allianz Global Investors ranks as a top-five global active investment manager, having €970 billion of assets under management (AuM), of which €725 billion are third-party assets, with specialized asset managers such as PIMCO (Bond fund), RCM(Equity fund), AAAm(Fund of Hedge fund), Degi(Real estate fund), etc.

You could therefore say that Allianz are into "banking" through subsidiary operations.

Bottom line: it all depends on how technical you want to get.

Edited by Realistbear

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  • 192 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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