What Is Bill Gross Thinking?

bill gross

We don’t mean that as an insult, we mean that literally… what exactly is bond god Bill Gross thinking now, in regards to his prediction of higher rates post QE?

We only ask, because it turns out that he’s sticking to that call, even as the end of stimulus has produced a big rally in bonds, and a fade in other risk assets.

The premise of his bet is that with the end of Fed bond buying, nobody else will pick up the slack, and rates will shoot up.

But as ZeroHedge puts it, we’ve seen exactly where the money will come from:

“…there will be continued transfer of capital from equities into bonds for the time being (thereby further impairing his, yes, short position), and with the world slowing down and global central bank tightening, a global re-recession (deep in the depression that started in December 2007) seems inevitable. The paradox is that absent QE3 to force a capital reallocation out of fixed income into stocks but mostly commodities, PIMCO’s TRF will continue to be unprofitable (even more if the fund has a steepener position on as many have speculated).

So we’re curious what dynamic he sees playing out that’s different, because it certainly looks on its surface like investors are eager to buy bonds, and will gladly pick up the football from Bernanke once he’s done.

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