Bill Gross put out his monthly investment letter Monday morning and the Janus Capital investment manager is barking up a storm over low interest rates.
But first, Gross, who joined Janus after breaking up with longtime employer PIMCO last fall, leads off his monthly letter with a lengthy musing on man’s best friend.
“If you were a dog, what kind would you be?” Gross asks readers. “I can’t say I’ve thought about it a lot myself, but it is an interesting, possibly introspective question considering the theory that many dog owners pick a breed that looks or perhaps acts like themselves.” Gross even uses the forum to reminisce a little bit about his own past canine companions — from a German Shepherd, named Budgie, to “Wiggles, the irrepressible Pomeranian.”
Anyone familiar with Gross’ personal brand of zany and meandering — though often entertaining — investment writing would not be surprised to see the legendary money manager quickly pivot from dog-talk to a discussion of global financial markets. Gross goes on to cover issues facing investors at a time when global markets are experiencing “an undeclared currency war” that he says has driven down interest rates around the world, particularly in the U.S., where interest rates are finally poised to rise after hovering near zero as part of the Federal Reserve’s quantitative easing policies that went into effect in 2009.
Gross points out the dangers of lower interest rates, which, he writes, “globally destroy financial business models that are critical to the functioning of modern day economies. Pension funds and insurance companies are perhaps the most important examples of financial sectors that are threatened by low to negative interest rates.”
Investors who have been in favor of lower rates, while fearing an eventual hike in the U.S., need to be concerned about the downside of those policies, writes Gross, who believes lower rates result in people saving more, rather than spending more to spur economic growth.
Gross closes the letter by returning to the dog metaphor and offering a piece of advice: “‘Home bred’ monetary policies earn ‘blue ribbon’ rewards in the short term, but in the long run may undermine the entire show and send the dogs towards the exits. Stay conservative in your investment portfolio. Own high quality bonds and low P/E, high quality stocks if you want to stay out of the doghouse. Arf, Arf.”