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Bill Gross says if all else fails, 'buy land in NZ'; bond guru worried about how the flood of cheap money will play out for investors

Posted in Property
Bill Gross, managing director, PIMCO

The head of the world's biggest bond fund is worried.

He is not convinced that the recent run-up in equities will last.

Pimco chief Bill Gross is warning investors to "be very afraid" of coming inflation and how the flood of cheap money will affect all investments.

They say that time is money. What they don’t say is that money may be running out of time.

Gross has been warning investors about the potential downsides of the Federal Reserve's bond buying strategy for months, but the tone of this month's letter was decidedly more fearful.

In his latest column, he says "our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic – it is running out of energy and time."

"When does money run out of time?"

"The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets," he says.

The element of time is critical because investors and speculators that support the system may not necessarily fully participate in it for perpetuity.

We ask ourselves frequently at PIMCO, what else could we do, what else could we invest in to avoid the consequences of financial repression and negative real interest rates approaching minus 2%? The choices are varied: cash to help protect against an inflationary expansion or just the opposite – long Treasuries to take advantage of a deflationary bust; real assets; emerging market equities, etc.

One of our Investment Committee members swears he would buy land in New Zealand and set sail.

You can read his full opinion piece here »

HT for this story to Andrew Patterson.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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14 Comments

I sense that he doesn't

I sense that he doesn't really mean New Zealand.   Americans sometimes refer to New Zealand as we refer to Timbuktu i.e. a faraway place.  
 

No ...the headline  is

No ...the headline  is absolute bollocks....as it was one committee members  who said this is what he /she would do , no doubt prompted by the inquirer.
poor form David C.....there is hyping then there is this real estate ( used car dealer) trash.
 I have no doubt some of the other committee members would choose a slice of paradise elsewhere.

Fair comment Count, but the

Fair comment Count, but the sentiment is there amongst the smart thinkers.
 
John Wyndham started it with The Chrysalids in '55.
 
Have you seen Avatar? What's the message? Planets, growth and resources. Same as Waterworld - Costner is no fool either, nor is Twain. These folk are sending a message - but you have to be smart enough to get it.
 
Watch thou for the mutant....

The sentiment PDK is based in

The sentiment PDK is based in idealism, a notional concept of a better place as yet untouched by the putrid fingers of consumption greed.
The tumour of greed is now well malignant in Godzone, with self producing antibodies to disguise anything pointing to it's presence.
Fonterra....now there's a word to encapsulate a possible future...ten million shitting cows genetically modified to occupy less space and produce the same volume of product as the original.
 Yes I have seen Avitar...thank you, but learned nothing I didn't already know.
A little surprised to see you refer to a pimco committee member as the smart people.
As to the destination, well I'm already here ...so I guess that makes me a genius...or geographically challenged.
 Stay well Happy New Year BTW. 

By the way PDK....it's us,

By the way PDK....it's us, the species, we are the ones that alter the natural balance of almost all we come into contact with.....and the more of us there are , the more we alter the natural order of things to facilitate the survival and proliferation of even more of us.
Now I'm no rocket scientist as you can clearly attest to, but I can see where that's going.
 The continual chicken and egg  finite rescource argument starts with us, more us more demand , more improvment to living standard in third world more demand.......ad nauseum. 

Little story.   Decade or so

Little story.
 
Decade or so ago, took a Southland client's promotional car for a spin around the South Coast to 'clear the carbon out'.
 
Went around Otautau, Tuatapere, out to the end of the Papatotara road, back through Orepuki and Riverton.  Old haunts (used to live in Southland, know them all well).  Great ride.
 
Handed decarbonated car back and mentioned the magic sea views during a Southerm summer sunset, from the Orepuki cliffs.
 
'Oh, those cliff view and sea side blocks have all been sold.  To Americans, as a Last Refuge.  Farmers could not use the land for much and were happy to flog it.  It's fairly much all gone that way.  Lotsa small blocks.'  I was told.
 
NZ has always been a Haven - why d'ya think James Cameron has set up shop in the Wairarapa?

NZ has always been a

NZ has always been a Haven.
 
Maybe the better word is refuge.
 
Generally ask the majority of North Americans about living permanently in NZ and the honest answer would be something along the same lines as suggesting to an Aucklander that the air is fresher and the land is cheaper in Eketahuna.

Yup..well aware of the

Yup..well aware of the landgrab percentages by U.S. citizens Waymad.
Wasn't the point I was making  , I took exception to the headline being used as an endorsement ad without being factually correct, as in estate agent loose with the truth.
 Grosse didn't make the endorsement ...a committee member did.
 

PIMCO is based in Newport

PIMCO is based in Newport Beach, CA, a WASPy and wealthy place famous for its sailing community. The kinship of this white rich guy sailing fraternity is why they view us and our waters as attractive, I suspect. EG: Francophiles interested in launching rockets would probably choose French Guyana.

So the worlds biggest bond

So the worlds biggest bond fund says the global monetary system is in it's death throws through excess credit growth.  Meanwhile the global central banks, private banks and politicians think the problem is insufficient gredit growth. Just a minor differance of opinion.
I'm sure it'll all work out just fine - not!

In the preface to "South

In the preface to "South Pacific" Mitcher tells a story of an American who saw WWII coming and decided to wait it out hiiding on a Pacific Island, after all his research he chose...Guadalcanal

ha..!...we'll be safe here

ha..!...we'll be safe here Maryanne ...you'll see..!

New Zealand land and New

New Zealand land and New Zealand currency, very sexy..The Chinese must be doing something right here..

This is a joke people looking

This is a joke people looking too much into this.  Basically he is saying if everything collapses set sail for NZ to ride out the storm and live out in the countryside with a few chicken while the world unravells. This is where the buy land in NZ comes into it.  You would not be buying land in NZ for any other reason as its too expensive compared to other favourable destinations in South East Asia or South America.  Its also the case if World War 3 breaks out set sail for NZ.