“Seventh Inning Stretch,”Bill Gross’s September Investment Outlook to PIMCO clients is riddled with baseball analogies.
But what’s somewhat surprising was his tirade against the sport.
This is interesting because we know that PIMCO CEO Mohamed El-Erian is a big Mets fan.
From Gross’s note:
Having mentioned Jack and the game of baseball, let me give you some opinions that come close to being hard cold facts, not wishes. First of all, baseball is the most boring game in the world next to cricket. I don’t know how to play cricket, which is the only reason I rank it second. CNN Sports did an actual survey of how much time during an average two hour and 39 minute game that baseball players are actually moving — you know, swinging a bat or running to first base. Five minutes and 13 seconds! The rest of the time the boys of summer are actually just standing around, scratching you know where, and spitting tobacco juice onto the nice green grass. Most disgusting, I’d say. And why, I wonder, does a baseball “season” consist of 162 individually boring games? In football you only need 16 or so to declare a champion, in boxing sometimes three minutes or less.
Now for some controversy: steroids, HGH and juicin’? I say, why not. They can’t be cheating if they’re all cheating together. And as a matter of fact, management and owners “cheat” all the time. If they have a lineup heavy with left-handed hitters, they will shorten the right field fence. The Yankees and now the Dodgers just “buy” championships with money from the game’s most gargantuan TV rights (who’s watching?). That’s playing by the rules? If your counterpoint on drugs is that it’s unnatural and harmful to the body, I wonder what’s so healthy about the way they conduct spring training or do their pregame warm-ups. Two or three half-hearted sprints in the outfield and they’re done. If baseball was concerned about health or addiction, they’d be testing for lip cancer or diabetes. Modern day relief pitchers, who now “exercise” for two innings or less on the mound, have pot bellies that would make a sumo wrestler proud. Why, the Babe was so fat he could hardly waddle back around to home plate 60 times in one season.
Last point, because I know you’re dying to hear my opinion on Pete Rose and the Hall of Fame. I say anyone as ugly as Pete deserves a free pass to Cooperstown or any town for that matter, maybe the same free pass that you’d have to give me to go to a baseball game again. Take me anywhere, but don’t take me out to the ball game and make me stretch during the seventh inning while I’m eating my Cracker Jacks. Reality can smack you in the face sometimes, like it did Pete Rose, but if I’m gonna be smacked it’ll have to be on the gridiron or the hardwood, not Yankee Stadium.
Of course, no one could accuse El-Erian’s Mets of “buying” championships.
Anyways, it’s not too hard to imagine what kind of parallels Gross draws to the economy and financial system.
Fast-forward to his recommendations (emphasis added):
So what to do here, folks? For those of you who are still fans of the old American pastime — in this case capitalism and the making of money as opposed to baseball — how do you play on this rather unstable field of our own making? Which pitch do you swing at? Well, commonsensically, in an unstable global economy that is increasingly difficult to stabilise, an investor should seek out the most stable of assets. At the extreme, that would be cash in the world’s most stable currency. But whether dollars, euros, or pounds be your first choice (ours being dollars), cash or overnight deposits in any of them yield next to nothing. So say you want something but don’t want to lose your money either; a modern day Will Rogers. More concerned about the return of your money than on your money but still a little greedy (or perhaps just needy) too. Well, some say stocks — the only game in town. But I don’t know. When the Fed stops the QE game, it seems that stocks might be at risk. After all, haven’t they more than doubled in price since 2009 in part because of it? Without Big Government deficits and Big Bank check writing and with the advancing risks posed by Big Regulation and the technical whimsy of Big Investor, the safest pitch to swing at may not be stocks but the asset that will soon be the nearly sole focus of central banks. Instead of QE, central bankers are shifting to “forward guidance” which, if reliable, allows financial markets and real economies to plan several years forward in terms of financing rates and investment returns. If unemployment and inflation rates can be at least closely guesstimated, then front-end yields become the most reliable bet in the ballpark, Pete Rose notwithstanding. While low, they can at least form the basis for curve rolldown and volatility strategies that have higher return/risk ratios than alternative carry options such as duration, credit or currency. With Big Investor unsure or perhaps unable to catch stock, long bond or currency fly balls in today’s afternoon sun, it’s perhaps best to field boring slow-rolling grounders based on policy rate stability for “an extended period of time.” Recall as well that the result of Minsky’s “Big Government” and “Big Bank” policies has always been accelerating inflation at some future time. We recommend longer-dated TIPS as insurance against just such an outcome.
Read Gross’s entire outlook at PIMCO.com.
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