- Legendary investor Bill Gross has said that investors in stocks and cryptocurrencies are in a dreamland.
- He told the Financial Times that the central bank’s monetary policy is dangerous and drives euphoria in the markets.
- Criticism of the Fed’s policies has grown stronger after US inflation rose to its highest level in 31 years in October.
Famous investor Bill Gross has said that an ultra-monetary policy from central banks has caused worrying euphoria in a range of markets from equities to cryptocurrencies, saying investors live in a “dream country”.
“It’s dangerous,” the co-founder of bond giant PIMCO told the Financial Times about monetary policy. “It’s all dreamland that has been backed by interest rates that are not where they should be.”
Gross went so far as to say that the entire financial system could collapse if interest rates are not raised and huge bond buying programs are not scaled down because people stop saving.
“One of these days, one of these years, or one of these decades, the system will collapse because capitalism depends on savers saving and investing,” he told FT.
Gross is now retired, but manages his own money, where he bet millions on GameStop earlier this year. He was once known as the “Bond King”, after co-founding the $ 2 trillion asset manager PIMCO in 1971.
The legendary investor is one of a number of big names in the markets who have raised concerns about global central banks’ monetary policy.
US inflation rose to 6.2% year-on-year in October, the highest level in 31 years, raising concerns that the government and the Federal Reserve have overstimulated the economy.
Gross’ former colleague Mohamed El-Erian said last week that the Fed has made one of the worst calls in its history by dismissing inflation as temporary.
“They got stuck in the narrative and stuck to it for too long,” El-Erian told Bloomberg TV. “And the result of this is that they are looking at inflation, which is much higher than they ever expected … much wider than they expected … and it will last even longer than they expected.”
Gross said he did not think inflation would remain as high as it is at the moment, but said he believes it is likely to remain above the Fed’s 2% target, the FT reported.
Still, he said the Fed may not be able to tighten monetary policy quickly as government markets are at the moment, with U.S. equities and cryptocurrencies around record highs.
“I think [Fed chair Jay Powell] is trapped in the financial markets and then he will gradually creep out of buying bonds and next year he may gradually raise interest rates, “Gross told FT.
Financial markets are currently expecting the Fed to raise interest rates for the first time in June 2022, according to CME Group’s FedWatch tool.
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