PIMCO's Gross says central banks trimming returns
By Sam Forgione
NEW YORK (Reuters) – Bill Gross, manager of the world's largest bond fund, on Wednesday likened central bankers to barbers giving "haircuts" to the value of investments through their easy money policies.
Gross, a founder and co-chief investment officer at bond giant PIMCO, said in his May investment outlook that, while monetary stimulus may be helping now to "refloat global economies and generate a semblance of old normal real growth," central bankers are doing so by "surreptitiously" trimming the value of assets.
In the letter entitled, "There Will Be Haircuts," Gross said that zero interest rate policies and money-printing incur a loss of at least 2 percentage points to Treasury holdings, given the negative returns that they create after accounting for inflation.
Gross said that the inflationary consequence of money-printing also trims the value of investments. The U.S. Federal Reserve is buying $85 billion in Treasuries and agency mortgage debt per month in an effort to spur U.S. economic growth and drive down unemployment.
Keep reading: PIMCO's Gross says central banks trimming returns.
