Friday, October 14, 2011

Betting on the collapse

Bill Gross Just Made A Huge Bet On Economic Doom, And Nobody Seems To Care

Read more: week, bond god Bill Gross just made a super-long bet on the long end of the yield curve, coming right after a historic rally in fixed income.
It was a gigantic shift from his stance earlier this year, when he bet against Treasuries -- a bet that famously worked out badly for him.
The interesting thing about this is that his short bet got TONS of attention (including a big story in The Atlantic), whereas his new long bet is only getting a little.
The funny thing about this is that in terms of implication for the economy, the new long bet is much more significant. Going super-long on the long end of the curve implies that Gross thinks yields will collapse even more, which would likely happen in a major economic collapse of some sort.

Read more:

Comment:  Bill may be wrong and right at the same time. He is probably right anticipating an economic collapse, yet he be wrong in his belief that therefore rates would fall. Even the best financial minds have difficulties to imagine extreme stagflation.

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