Bond King Bill Gross (JUCIX) is not so hot on bond investing, at least in the long term. In an exclusive interview with Yahoo Finance Senior Columnist Michael Santoli, Gross said, “In the short term, bond investors are safe for six to twelve months, but not for ten to thirty years.”
Gross cites his own losses from 1979-1981 when long term interest rates soared to 15%, cautioning investors to “be careful when you’re making a longer term commitment and interest rates are so low.”
Should rates pop like they did some 35 years ago, Gross says it will happen on the backs of QE in Europe and continued growth here at home:
If Euroland is receptive to QE and begins to grow, if the United States stays at a 2-3% growth rate and if inflation in the U.S. and elsewhere moves back up closer to that 2% magic level that the fed and other central banks seem to want then a bondholder would or should be very cautious.
Gross also reiterated his belief that a Fed rate hike is coming. “In terms of when it happens, June has always been the month that most of them circle around and so maybe June or July, but a small increase and probably one only for the year would be my guestimate.”
Watch the entire interview with Bill Gross here
Gross also weighed in on the broader economy and, notably, jobs. He believes technology and demographics are weighing heavy on economies here at home and abroad.
“Technology displaces workers,” he argues. “It's wonderful that Google (GOOGL) and Apple (AAPL) and other companies can create these magnificent technologies but it is true that Apple doesn't create as many jobs as General Motors (GM) did in the 1930's and 40's.”
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While blaming tech for job loss is nothing new, Santoli says Gross is being a bit more measured. "I don't think he's saying it's that bad or that the robots are going to be taking our jobs forever. He actually was comparing it to the 1930's when you had a tremendously big structural shift going on in the economy from agriculture to urbanized manufacturing... He does see massive productivity gains in technology, it's not universally good at least in the near term."
As far as demographics go, Gross says:
Capitalism may have a structural problem in terms of demographics… The demographics of the developed world are such that an aging population doesn't want as many things as a younger population - no babies, no new houses, no new car or baby seat to fill it up so capitalism faces that demographic problem.
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