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Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., reduced holdings of mortgage debt last month and added to cash and equivalent securities.
Gross cut the $161 billion Total Return Fund's investment in mortgage bonds to 54 percent of assets, the lowest in almost two years, from 61 percent in May, according to a report on Pimco's Web site. Gross trimmed holdings of government-related bonds to 24 percent of assets, the least since February, from 25 percent.
In an investment outlook published earlier this month, Gross said investors should look for "secure income" offered by bonds and dividend-paying stocks. "The outlook for risk assets – stocks, high-yield bonds, and commercial and residential real estate will involve just that – risk," he said in the July 1 report.
Gross cut the $161 billion Total Return Fund's investment in mortgage bonds to 54 percent of assets, the lowest in almost two years, from 61 percent in May, according to a report on Pimco's Web site. Gross trimmed holdings of government-related bonds to 24 percent of assets, the least since February, from 25 percent.
In an investment outlook published earlier this month, Gross said investors should look for "secure income" offered by bonds and dividend-paying stocks. "The outlook for risk assets – stocks, high-yield bonds, and commercial and residential real estate will involve just that – risk," he said in the July 1 report.
- Bloomberg
Bond fund giant Pacific Investment Management Co., whose founder and co-chief investment officer Bill Gross has been persistently bearish on Treasurys, is changing its tune.
In a research report released Monday on its Web site, Pimco said it plans to take exposure in the five- and 10-year portion of the Treasury maturity curve because yields are near the top of the company's expected range.
The change in investment strategy is based on Pimco's view that economic growth in the developed world will be slow, as consumer spending may be hampered by high levels of debt, while deleveraging will weigh on financial institutions. Uncertainty over fiscal policy and protectionism is also contributing to the muted growth outlook, the report said.
Given the weak economic outlook, the Federal Reserve is unlikely to tighten before summer 2010, and policy makers in many countries are likely to "overstay with loose monetary policy."
In a research report released Monday on its Web site, Pimco said it plans to take exposure in the five- and 10-year portion of the Treasury maturity curve because yields are near the top of the company's expected range.
The change in investment strategy is based on Pimco's view that economic growth in the developed world will be slow, as consumer spending may be hampered by high levels of debt, while deleveraging will weigh on financial institutions. Uncertainty over fiscal policy and protectionism is also contributing to the muted growth outlook, the report said.
Given the weak economic outlook, the Federal Reserve is unlikely to tighten before summer 2010, and policy makers in many countries are likely to "overstay with loose monetary policy."
- Dow Jones Newswires
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How to Get 20% a Year Out of Your Property
By Tom Dyson Tuesday, July 21, 2009 How to Get 20% a Year Out of Your Property -
How I Found a Pile of Cash Paying 11% Dividends
By Tom Dyson Monday, July 20, 2009 How I Found a Pile of Cash Paying 11% Dividends -
Two Shocking Silver Charts
By David Eifrig Saturday, July 18, 2009 Two Shocking Silver Charts -
You Won't Believe This Bear Market Is Almost Over
By Dr. Steve Sjuggerud Friday, July 17, 2009 You Won't Believe This Bear Market Is Almost Over -
What You Should Do If Stocks Fall Farther from Here
By Dan Ferris Thursday, July 16, 2009 What You Should Do If Stocks Fall Farther from Here
The Last Cheap Asset Class Today
By Dr. Steve SjuggerudWednesday, July 22, 2009
The recession is DEFINITELY over. There's just one asset class left to rise...
In the March 20 DailyWealth, I said we were through the first half of myEconomic Recovery Script: 1) Corporate bonds had bottomed, 2) the price of copper had bottomed, and 3) stocks had bottomed. So I said, "It's time to buy stocks."
Stocks rallied huge – 40% since March. But the Script wasn't over until this month...
Two things signal the end of the recession in our Script: 1) a spike in consumer confidence and 2) a spike in the "CILI" ratio.
Consumer confidence hit an all-time low in February at 25.3. Then it soared... As of June 30, it's at 49.3. And earlier this week, the "CILI" ratio gave us full confirmation the recession is over.
The CILI ratio is a ratio of "today" versus "yesterday," so to speak. Specifically, it's a ratio of the Coincident Indicators ("today") to the Lagging Indicators ("yesterday"). (The Conference Board puts out these indicators. You can visit www.conference-board.org for more details.)
When today starts looking better relative to yesterday, we're finally out of the woods. A rising CILI ratio says things are getting less bad.
Back in March, I said we needed to see the CILI ratio rise for three straight months. As of this week, we got what we were looking for...
So the recession is over. No doubt about it. The Script nailed it. Now that it's over, you won't believe what goes up next...
Look, last year, people thought the bond market was ending as we knew it. Then it recovered dramatically. Next, by March, people thought the stock market was going to fall indefinitely. Then it, too, recovered dramatically.
Now people think housing will never recover... But consider this: Housing prices from San Francisco (down 48%) to Miami (down 46%) have crashed. In the bubble markets of Phoenix and Las Vegas, home prices are down over 50%. Meanwhile, mortgage rates are near record lows. So U.S. housing is more affordable than it's ever been.
Corporate bonds are no longer the bargain they were. Stocks certainly aren't. Today, the last cheap asset class is housing.
I didn't expect we could burn through the Script so fast. But we did. My Economic Recovery Script has been remarkably accurate so far... And according to the Script, things are about to get less bad in housing.
I, for one, am going to start making some lowball bids on residential real estate in my area (on the Florida coast). In the latest issue of my newsletter, True Wealth, I describe how I plan to do it and how I hope to make a few hundred thousand dollars of gains after tax.
My friend, we are out of recession. And our Economic Recovery Script says housing is about to recover. It's been right all along... so bet against it at your own risk.
Good investing,
Steve
In the March 20 DailyWealth, I said we were through the first half of myEconomic Recovery Script: 1) Corporate bonds had bottomed, 2) the price of copper had bottomed, and 3) stocks had bottomed. So I said, "It's time to buy stocks."
Stocks rallied huge – 40% since March. But the Script wasn't over until this month...
Two things signal the end of the recession in our Script: 1) a spike in consumer confidence and 2) a spike in the "CILI" ratio.
Consumer confidence hit an all-time low in February at 25.3. Then it soared... As of June 30, it's at 49.3. And earlier this week, the "CILI" ratio gave us full confirmation the recession is over.
The CILI ratio is a ratio of "today" versus "yesterday," so to speak. Specifically, it's a ratio of the Coincident Indicators ("today") to the Lagging Indicators ("yesterday"). (The Conference Board puts out these indicators. You can visit www.conference-board.org for more details.)
When today starts looking better relative to yesterday, we're finally out of the woods. A rising CILI ratio says things are getting less bad.
Back in March, I said we needed to see the CILI ratio rise for three straight months. As of this week, we got what we were looking for...
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So the recession is over. No doubt about it. The Script nailed it. Now that it's over, you won't believe what goes up next...
Look, last year, people thought the bond market was ending as we knew it. Then it recovered dramatically. Next, by March, people thought the stock market was going to fall indefinitely. Then it, too, recovered dramatically.
Now people think housing will never recover... But consider this: Housing prices from San Francisco (down 48%) to Miami (down 46%) have crashed. In the bubble markets of Phoenix and Las Vegas, home prices are down over 50%. Meanwhile, mortgage rates are near record lows. So U.S. housing is more affordable than it's ever been.
Corporate bonds are no longer the bargain they were. Stocks certainly aren't. Today, the last cheap asset class is housing.
I didn't expect we could burn through the Script so fast. But we did. My Economic Recovery Script has been remarkably accurate so far... And according to the Script, things are about to get less bad in housing.
I, for one, am going to start making some lowball bids on residential real estate in my area (on the Florida coast). In the latest issue of my newsletter, True Wealth, I describe how I plan to do it and how I hope to make a few hundred thousand dollars of gains after tax.
My friend, we are out of recession. And our Economic Recovery Script says housing is about to recover. It's been right all along... so bet against it at your own risk.
Good investing,
Steve
PIPELINE STOCKS HAVE FORMED A NEW UPTREND
After going temporarily crazy last year, pipeline stocks are finally acting like they "should."
In normal times, a pipeline investment is a good friend to the income investor. There's no exciting "high growth" story... They simply collect fees for transporting natural gas and other fuels across America. They also have a special corporate structure (called an "MLP") that allows them to pass most of their earnings along to shareholders.
For much of the period between 2000 and 2008, pipelines acted like boring income investments should. No drama... just steady share price appreciation and dividends in the 5%-10% range. But like all assets, pipeline shares were obliterated last fall. The benchmark Alerian MLP Index fell 51% in just six months.
But as you can see from today's chart, pipeline shares are acting like they should again. The Alerian Index has rebounded to reach a nine-month high and currently yields around 8.5%. And get this: These companies have Washington, D.C. on their side. Only clean energy – like natural gas – can flow through those pipes.
In normal times, a pipeline investment is a good friend to the income investor. There's no exciting "high growth" story... They simply collect fees for transporting natural gas and other fuels across America. They also have a special corporate structure (called an "MLP") that allows them to pass most of their earnings along to shareholders.
For much of the period between 2000 and 2008, pipelines acted like boring income investments should. No drama... just steady share price appreciation and dividends in the 5%-10% range. But like all assets, pipeline shares were obliterated last fall. The benchmark Alerian MLP Index fell 51% in just six months.
But as you can see from today's chart, pipeline shares are acting like they should again. The Alerian Index has rebounded to reach a nine-month high and currently yields around 8.5%. And get this: These companies have Washington, D.C. on their side. Only clean energy – like natural gas – can flow through those pipes.