Tuesday, January 22, 2008
Bill Gross's views as 01 22 2008
1.Fed move - Fed is behold to market in response to stock and bond market. Stock and Housing market are two pegs that support ultimate consumer. But it is a sad testment that Fed cut interest rate eight days before the scheduled meeting. ECB and Bank of England did not follow along. 2.Inflation vs recession: Economy, Employment has higher priority than inflation. 3.1% again - no, in 2003, we had deflation. Currently, housing deflation is in the table, but Food and energy see inflation at a 3% clip. 2.Bank Capital looks attractive - at least 200 bps above Treasury, 10y. Banks 5.5% 3.BoA, profitability is more important than downgrades. With lower rates, BoA will have postive yield curve. Profitablity will come to this insitute. 4.Treasury & Bond market - T-rally is over. Banks Bonds relatively cheap and too big to fall. 6 M from now, Baa corporate will be appealing. 5.Currency, dollar becomes funding currency. Like emerging mkt currencies. Yield spread narrowing, Yen has been undervalued.