Bill Gross: “Financial Repression” Is On And Savers Are Going To Suffer For 5 To 15 Years

Pimco’s Bill Gross spoke to Bloomberg Television today about his company’s positions in the U.S. treasury market, and his views on the U.S. recovery. On his company’s 2011 performance, Gross says “don’t cry for Pimco,” as his firm is beating two thirds of all other bond managers.

Gross’ comments on financial repression:

“It means that savers are being disadvantaged and will be disadvantaged for perhaps five, 10 to fifteen years relative to debtors.”

“What policymakers are trying to do is rebalance this imbalance in terms of too much debt and too attractive rates on savings.  What happens since 1946 to 1979 in the UK and the U.S., in order to rebalance balance sheets, was that the U.S. basically kept interest rates at 2.5% for much of that period of time and offered substantially lower real interest rates. That is what will be done here, and basically, it is called financial repression. We call it pocket picking. We simply suggest that investors look into other areas in order to achieve returns. “

And on Pimco’s treasury positions:

“We’re not overweight Treasuries. We’re certainly underweight Treasuries, but that does not mean we don’t own lots of other bonds. German bunds and Canadian bonds are rallying. We simply think those are better alternatives. It does not mean as well that we’re not a little bit shy in terms of duration. We’re having a good year…so don’t cry for Pimco.”

“What we are trying to do is find some countries that are less financially repressed…In the United States, the policy rate at 25 basis points is about 300 basis points less than inflation. That, along with the examples in the UK, are financially repressive, meaning that investors earn a substantial amount less than inflation. We want countries where we can do better than that.”

From Bloomberg Television: