Women in Mao, Central Africa. Source: Wikipedia
Dear Diary,
Hey, want to screw up your life? Get rich. More on that in a minute…
In the meantime, does Bill Gross’s departure from PIMCO mark the end of an era?
Is it the end of the bull market in bonds?
We don’t know. No one does. Yesterday, there was little movement in the bond market or the stock market. But gold dropped $10 an ounce. And it now looks like it will test the $1,200 level.
Commodities are soft. The dollar is strong. If this is because global economic growth is slowing, as Chris warned yesterday, it could also mean even lower bond yields.
The 30-year US Treasury bond yields all of 3.2%. Could it fall below 3%? How about 2%? Anything is possible, isn’t it?
If so, the top of the bond market could still be scheduled for when we are deep in retirement, drooling quietly in some forgotten nursing home after having given up all care about bond yields or bodily functions.
A Brief History of Bonds
Gross has been with PIMCO – a company he cofounded – since 1971. Patton was the big film of the year. Charles Manson got the death penalty. And President Nixon severed the last direct link between the dollar and gold.A Brief History of Bonds
This freed credit from its earthly fetters… and it soared. Over the course of Gross’s career, total credit in the US increased 50 times.
At first, the bond market shuddered at the thought of a fiat dollar. Interest rates and inflation ran for cover. But 10 years later, incoming Fed chairman Paul Volcker brought the situation under control. Interest rates have been falling ever since.
Now Gross is 70. And he’s parted company with the firm he helped create.
Even if the top is not exactly in, it’s probably a good time for the rest of the bond players to look around them and plan for a graceful exit too. No market goes in the same direction forever.
