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Bill Gross: Stock Markets Are Casinos Now; Stay In Cash
Aspire, Thought Leaders | 12 October 2015
By: Vance Wong
Articles (74) Profile

In Bill Gross’s September investment outlook, the legendary bond guru and bond manager of Janus Capital mentioned that cash is king in a climate of anaemic growth. He maintains that view in his outlook for October, this time with some added frustration and rage that the Fed is still unwilling to lift off rates.

As much as the jobs report, wages growth and ultimately core inflation are all not looking good enough for a rate hike, Gross thinks that they are merely creating more “economic sinkers”. The economy might look like it is hanging on but economic growth will ultimately be affected.

Saved By Zero, Or Not?

Having ultra-low interest rates have undoubtedly kept the economies going, be it in the US or Eurozone. However, such monetary policy is supposed to save the economy, not feed and create a complacent market that thinks ultra-low interest rates is the new norm.

Gross feels that this might have kept the economies running, but at the cost of increasing the load that it has to bear in the long-run. What we have now is stifling economic growth in the US, Eurozone, and possibly the entire world, since economies are and never will be, independent.

Furthermore, Gross points out that the Fed had never acknowledged the “destructive influence” of ultra-low interest rates, especially when persisted over a long time. The “savings function of capitalism” is thrown out the window, but little do we know that it is one of the, if not the important principle of investments.

So, is the global markets really saved by the zero? Gross definitely does not think so. A two-percent interest rate would certainly drive stocks and bonds down and the markets might go into turmoil. It seems like Gross is nagging but he reiterates the importance of this short term pain for an “almost certainly” assured long term gain.

Stock Markets Are Like Casinos Now

Two weeks ago, legendary bond guru Bill Gross tweeted via Janus Capital and mocked investors who think the stock market is a good place to put money in. To the bond manager, cash is the only security that makes sense right now.

Later that week on 1 October, Gross tweeted again, this time saying that stock markets right now are like casinos. The only way to invest in a casino-like market is to mimic a gambler in an actual casino.

Investors’ Takeaway

If we were to read between the lines, Gross is actually saying that the markets are so volatile that investment no longer seem like an educated guess, but a bet. In an environment where uncertainty of when the Fed will raise rates and volatility triumphs, it is no wonder Gross advises investors to stay in cash.

Still worried about when and how much would the US Federal Reserve hike interest rates? Do you have burning questions that you want to ask regarding the China economic slowdown and SHCOMP nosedive in June? Are you confused if any of the external factors from other countries in Asia will affect your Singapore stocks portfolio?

Catch renowned investors and speakers with rich experience in the stock markets, who have had witnessed multiple stock market crashes and global recessions over the years at Shares Investment Conference 2015!

Talk to our speakers Face-to-Face!

Speaker profiles

1. Dr Chan Yan Chong, a renowned investor with more than 25 years of experience and the MBA programme director & associate professor of business school at the City University of Hong Kong.

2. Kevin Gin (CFA), the Founder and Principal of Alpha Capital. He was the former COO for CITIC Securities, Head of Singapore and Regional Real Estate Research for Kleinwort Benson Securities Asia (now part of Credit Suisse) and Head of Greater China Property Research with Yuanta Securities (Hong Kong)

3. Louis Wong, one of the most experienced fund managers in Hong Kong. He has over 25-years of solid experience and track record in the financial market. He was awarded Best Financial Analyst for 3 years by the Putonghua Channel of Radio Television Hong Kong and is also a part-time instructor of several investment courses in various Hong Kong universities.

4. Daniel Loh, an investment coach that specialises in equities and derivatives trading, he appears regularly on local TV financial programmes like “Good morning Singapore” and “Hello Singapore”.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.


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