Bond investor Bill Gross decided to go against the Federal Reserve on Wednesday, stating that chair Janet Yellen and her predecessors and colleagues are mastering “the art of market manipulation.”
Gross wrote in a recent investment outlook that: “All have mastered the art of market manipulation and no – that’s not an unkind accusation – it’s one in fact that Ms. Yellen and other central bankers would plead guilty to over a cocktail at Jackson Hole or any other get together of Ph.D. economists who have lost their way.”
He included: “With Yellen, there is no right or left hand – no ‘on the one hand but then on the other’ – there are only decades of old orthodoxy that follows the tarnished golden rule of lowering interest rates to elevate asset prices, which in turn could (should) trickle down to the real economy.”
Gross has been fighting against extremely loose central bank policies for completely ignoring global economies by helping out what he calls “zombie” corporations and making “creative destruction.” For many years, Gross as well as others have stated that zero and negative interest rates do not merely neglect to help in case of a recession, but also can destroy capitalism’s business models. Those business models are dependent on a yield curve spread or an interest rate that allows a true return on saving, in comparison to an incentive for spending, he stated.
“Capitalism, almost commonsensically, cannot function well at the zero bound or with a minus sign as a yield,” Gross, who oversees the Janus Global Unconstrained Bond Fund, said. Gross added that $11 trillion of negative-yielding bonds are liabilities instead.
“Factor that, Ms. Yellen into your asset price objective. You and your contemporaries have flipped $11 trillion from the left side to the right side of the global balance sheet.”