This week there’s been a growing chorus by some of the world’s top investors to (as RBS famously said at the start of 2016) “sell everything”. This time around, it is coming from a couple of the “bond kings”. Bill Gross, head of Janus Capital told his clients this week that he, “doesn’t like bonds; doesn’t like most stocks; doesn’t like private equity”. Gross’s view carries some weight, given he is the former head of the world’s biggest bond manager Pimco.
The overwhelming reason he doesn’t like to invest in the usual asset classes is because central banks have created an environment where economic growth and high yielding returns are hard to find. A great example being deposit rates in most major economies around the world are either near zero, at zero, or are negative. Yes, negative! You pay the bank.
And it’s not just Gross.
Jeffrey Gundlach last week in an interview with Reuters quoted the artist Christopher Wool in saying “Sell the house, sell the car, sell the kids”. He referenced weak economic growth, and stagnant corporate earnings for his bearish view. Gundlach manages $100b at DoubleLine, and also added that they never go to a zero holding in US Government Treasuries, just reduce weights and change duration (in other words, they don’t own longer dated investments).
…Not quite practising his famous quote?
What can be summarised though is both experts believe there is “too much risk for too little return”. This is not limited to financial markets, as banks don’t necessarily want to lend either. Main street then suffers as savings don’t earn returns, and business investment falls. Consider the RBA’s historic move to a cash rate of 1.5%, and what that will actually do to the army of self-funded retirees relying on term deposits for income.
Gross believes central bank policies have hampered growth and are pushing investors further up the risk spectrum. Aside from plugging an investment in his managed fund, Gross believes real assets such as land, gold, and tangible plant and equipment are attractive. He adds that this is out of the reach of most investors, because wealth has been “financialised”.
Perhaps this will be the turning point for some of the innovative fintech solutions that look to crowd-fund these types of real assets?
