Investing legend Bill Gross says the Fed risks sinking the dollar if it persists with its ultra-easy policies

bill gross sunglasses
Bill Gross.

  • The world’s reserve currency could sink under the Fed’s current policies, Bill Gross said in the FT.
  • He disputed Jerome Powell’s decision to keep interest rates low until the pandemic is under control.
  • Inflation will force the Fed to move away from its ultra-easy policies sooner than expected, he said.
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Billionaire investor Bill Gross wrote in a Financial Times op-ed on Tuesday that the Federal Reserve could risk sinking the dollar if it continues to support accommodative monetary policies for too long.

“I suspect that $5 trillion spending programmes and the Fed’s current package of near zero per cent short-term rates and $120 billio n of monthly bond buying will move growth, inflation and financial markets far beyond reasonable targets that ultimately will jeopardize post-Covid-19 normals,” he wrote.

Gross, who has since retired since co-founding investment firm Pimco and moving Janus Henderson Investors, argued the threat of inflation will force the US central bank to change tack and move away from its policies sooner than it expects.

“The Fed cannot for long continue to maintain current policy rates and expand its own balance sheet and therefore private bank reserves at a $120 billion monthly pace,” he said.

Enormous amounts of money, as a result of quantitative easing, pumped into the economy over the past year to help sustain the fallout from COVID-19 led to an increase in the amount of cash in circulation. This circumstance inevitably leads to inflation and decreases the value of the currency, thereby devaluing investor savings.

Gross called out Fed Chairman Jerome Powell for transitioning from a more conservative stance to one that has “unleashed the potential for chaotic future economic and market outcomes.”

The one-time “bond king” disputed Powell’s decision to keep interest rates low until the pandemic is more controlled and employment returns to normal. Unemployment may never return to 4% given the revolutionary changes in the work-from-home environment, in Gross’ view.

“And how long can the Treasury continue to require near-costless Fed financing for $2 trillion, $3 trillion and $4 trillion deficits without sinking the dollar? In a historical gold-standard world, Fort Knox would have been emptied long ago, implying the bankruptcy of the world’s reserve currency,” he said.

Gross also suggested that several cryptocurrencies and the boom in special-purpose acquisition companies have been a result of having an accommodative Fed.

“Cash has been trash for years, but soon it may be the only haven for investors sated beyond reasonable expectations of perpetually low yields and supportive bond kings and queens,” he said.

Read More: A senior crypto trader at a $500 million digital asset manager shares his favorite trading strategies to generate ‘riskless profits’ – and the 3 sectors of the nascent market that he is most bullish on

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The 44-year-old successor to billionaire ‘Bond King’ Bill Gross is retiring early to go on road trips with his kids. ‘The pandemic has caused everybody to reevaluate.’

Nick Maroutsos
Nick Maroutsos will retire from Janus Henderson Investors in October.

  • Nick Maroutsos, head of global bonds at Janus Henderson Investors, told Bloomberg he will retire in October.
  • The 44-year-old said the pandemic had made him reevaluate his life. He wanted to spend time with his kids, he said.
  • Maroutsos took over from legendary billionaire “Bond King” Bill Gross in 2019.
  • See more stories on Insider’s business page.

Nick Maroutsos, head of global bonds at Janus Henderson Investors, is set to retire in October to take more road trips with his kids, after the pandemic caused him to reevaluate his “goals in life,” he told Bloomberg.

The 44-year-old investor took over from “Bond King” Bill Gross at Janus in 2019. The firm manages a $400-million portfolio.

He said he planned to spend more time with his wife and three children, and take his 14-year-old daughter to cross-country lacrosse tournaments. He wanted to spend more time with his kids while “they still like me,” he said.

“The pandemic has caused everybody to sort of reevaluate not just their career paths, but goals in life,” Maroutsos said. “I spent a lot of time thinking about that and where I want to be in the next 10 years.”

Maroutsos founded fixed-income investment company Kapstream Capital in 2007, which was bought by Janus eight years later. He manages the Janus Henderson Short Duration Income ETF, which has a $3 billion market capitalization.

Maroutsos said that, after spending 20 years working in fixed-income investments, now was a good time to “step back and hit the reset button.”

Maroutsos said he would work again at some point, but was not sure exactly where.

“In a year’s time, I will probably resurface in some capacity. I’m looking at things potentially outside of fixed income,” he said. “But I’m not good enough at other things, like either music or cooking, to do them.”

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Bill Gross is shorting US Treasurys and says inflation will be as high as 4% in coming months

FILE PHOTO: Billionaire investor Bill Gross listens during the Milken Institute Global Conference in Beverly Hills, California, U.S., May 3, 2017. REUTERS/Lucy Nicholson/File Photo

Billionaire “Bond King” Bill Gross told Bloomberg he is short US Treasurys and is expecting inflation to spike up in the US in the near future.

The PIMCO co-founder said in a Bloomberg TV interview he was short US Treasurys heading into the sell-off last week where the 10-year Treasury rose above 1.6% and prices fell. On Wednesday, the yield on the benchmark 10-year Treasury note hit 1.67%, a level not seen since mid-January 2020.

He’s still short Treasurys, and he also expects inflation to rise above the Fed’s target to 3-4% in the next few months as nearly $2 trillion in fiscal stimulation enters the market and household income goes “gangbusters.”

“There’s no reason to expect that inflation at least, not necessarily treasuries, but inflation at least will be screaming higher over the next several months and that’s what some investors are anticipating,” Gross said.

He added: “Inflation, you know, currently below 2% now is not going to be below 2% in the next few months. I see a 3% to 4% number ahead of us.”

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Billionaire investor Bill Gross made $10 million betting against GameStop – after Elon Musk’s ‘GameStonk!!’ tweet helped put him $15 million in the red

bill gross
Bill Gross.

  • Bill Gross made about $10 million betting against GameStop in January.
  • The billionaire investor was down by $10 million to $15 million at one point.
  • The Pimco cofounder criticized Elon Musk for cheering on the GameStop buyers.
  • Visit Business Insider’s homepage for more stories.

Billionaire investor Bill Gross made an ill-timed bet against GameStop in January that left him down as much as $15 million at one point. However, he held on until the video-game retailer’s stock plunged, and walked away with about $10 million.

Gross, who cofounded Pimco and ran its flagship Total Return fund, now manages money for his family and foundation. He used options to wager that GameStop’s stock price would fall, he said on the Citywire Selector podcast this week. 

“I knew I had an advantage over Reddit and the boys,” Gross said, highlighting his access to real-time options and volatility data on his Bloomberg terminal. However, he opened a bearish position on GameStop well before its shares peaked at north of $480 on January 28, and paid the price.

“I got in too early,” he said. “I got short around $150 or $100 and at a decent size. I was losing millions of dollars and that’s not a good feeling when you go to bed.”

“Matter of fact, you wake up three or four times in the middle of the night and you check out GameStop on the black market,” he continued.

While Gross admires Tesla CEO Elon Musk and views him as a “modern Thomas Edison,” he didn’t enjoy it when the executive tweeted “GameStonk!!” on January 26, throwing his weight behind the short squeeze.

“Musk is a little devil and he enjoys playing these games,” Gross said. “He’s just a frisky guy and so I didn’t resent that, but it doubled the stock and that’s when I lost the most sleep – it was after Musk did that.”

“He probably should have known better, because that’s close to yelling ‘fire’ in the theater,” the investor added.

Gross thought about giving up and stomaching a loss, but he was confident that some of the day traders driving up the stock wouldn’t be able to resist cashing out. 

“I’m not regulated here like some of the hedge funds, and my broker’s not calling me for margin and so on,” he said. “At $400 I said, ‘Hell no,’ and so I doubled up to catch up, which was for me a very ballsy move.”

Gross also analyzed the volatility of GameStop stock and determined that he was almost certain to come out ahead.

“It was one of those slam-dunk moments where yes, you could lose money, yes it could go to $1,000, but the volatility was priced so high that it was really hard to lose,” he said.

“Risk-reward, it became one of those ‘you’re the casino,'” Gross continued. “That’s when I doubled up, I sold more calls, and basically got out. I made a lot of money, maybe $10 million. But I was down $10 million and maybe down $15 million.”

Gross felt vindicated that his assessments of the human nature and herd psychology at play, as well as the swings in the stock, were correct.

“It was a nice, intellectual, non-emotional moment for me in which I correctly analyzed the social aspects and the fact that people would turn on the group and sell before others thought they were gonna sell, and the volatility being so high priced that it was really hard to win,” he said.

Regardless, Gross gave kudos to the Wall Street Bets community for their ingenuity.

“Their strategy to attack and squeeze shorts, certainly with GameStop, was a good one,” he said. “I was really not expecting the stock to go through $10, $20, $30, $40, $100, $200, $300, $400 within the space of a few days.”

However, the astounding stock rally was never going to last, he said in a research note on February 2. “Even without regulatory action, the plan was doomed from the beginning,” he wrote.

Gross described the investors who bought options with 750% daily volatility as “fish at the poker table” in an earlier research note. He added that a “musical chair, me-first exit” from GameStop was inevitable and the price was bound to return to normal levels.

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Billionaire investor Bill Gross says the ‘Teslas of 2020’ may struggle in 2021 and reveals his top sector pick for the new year

FILE PHOTO: Billionaire investor Bill Gross listens during the Milken Institute Global Conference in Beverly Hills, California, U.S., May 3, 2017. REUTERS/Lucy Nicholson/File Photo
Billionaire investor Bill Gross listens during the Milken Institute Global Conference in Beverly Hills

Billionaire investor Bill Gross said 2020’s growth stocks “may struggle” in 2021 and revealed his favorite sector pick for the new year in his latest Investment Outlook letter. 

According to the PIMCO co-founder, stocks that soared in 2020, like Tesla and certain SPACs, won’t repeat the performance in 2021.

Tesla was up over 740% in 2020, with most Wall Street analysts predicting either a decline or only slight increase for the EV maker’s stock price in the next 12 months. Meanwhile, the top performing SPAC according to Nasdaq, QuantumScape, flew over 1,115% in 2020. 

For returns in 2021, Gross is eyeing natural gas pipeline stocks within the energy sector of the market. He said the market sector yields between 9% and 12% for investment grade stocks with certain tax advantages. Gross told inventors to “take a look” at Magellan Midstream Partners, BP Midstream Partners LP, and Enterprise Products Partners L.P.    

Read more:Buy these 30 stocks that handily beat the market in 2020 and are poised for the best global returns in 2021, RBC says

“TSLA? In the hands of the Robinhood gods I’m afraid it’s definitely overvalued,”he added. 

The billionaire investor also commented on what’s behind the sky-high asset prices in the market.

“This market is driven – yes – by intense speculation, but also by fiscally pumped, central bank-primed corporate earnings, which when discounted to present value by near zero nominal and in many cases negative real interest rates, produce record stock prices,” Gross said. 

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