Bill Gross, Managing Director of PIMCO, and a bond maven, recently posted a brilliant article (in my opinion) about what just happened in the market. I suggest all my clients read it at http://www.pimco.com/EN/Insights/Pages/The-Tipping-Point.aspx. It is a clear, concise discussion of one of those moments when there is just not any “safe” place to invest.
For the up-side to rising interest rates, read “5 reasons Retirees should be psyched about rising interest rates” in this newsletter.
Here is a little piece:
The forecast for bad weather as I’ve mentioned was becoming more rational with every increase in asset prices. If all markets were being artificially supported as PIMCO claimed and the Fed confirmed, then someday, someday that support via quantitative easing would have to be withdrawn. But the dark clouds seemed to be far off on the horizon. Investors worldwide piled on the leverage – not just in high yield or equity space – but in Treasuries as well. If the Fed (and BOJ) were going to keep writing checks at one trillion per year, then these two central banks alone might be buying 70-80% of all developed market future supply. The fear was that there might not be enough for others, not that there was too much leverage.