- REUTERS/Jim Young
Bill Gross is at it again.
Gross, the bond investing guru at Janus Capital, released his January outlook letter on Tuesday – and in typical Gross fashion, it’s a doozy.
No stranger to starting his investment letters with a bang – previous analogies included telling his child about sex and discussing the US prison system – Gross kicked off January’s letter with “Echoes of Africa,” a poem about the continent.
“If I sang a song about Africa/ Of the spotted giraffe, the hyena’s laugh/ Of the fiery sun rising to meet the day/ With a stillness belying the lion’s evening meal;/ Would Africa sing a song about me?” reads the opening stanza of the poem.
Gross muses on Africa as it relates to life itself, calling the continent “the cradle of civilization, if not life itself” and posing the questions Africa made him ponder.
“Are we just passing through without a trace following our dusty deaths?” the investor wrote. “Will anyone, or anything, at the end of the line be the better for our time on earth? I, myself, know nothing of a grand scheme of existence, but I wish there to be one – if only to give meaning to our precious moments of happiness and frequent hours of despair.”
From there, Gross went into his outlook on President-elect Donald Trump’s effect on the US economy. Gross is skeptical of Trump’s ability to truly affect the economy given deteriorating demographics and the increase of central-bank-fueled debt.
“The 1% difference between 2 and 3 is, therefore, critical,” Gross wrote, referring to GDP growth rates. “We shall see whether Republican/Trumpian orthodoxy can stimulate an economy that in some ways is at full capacity already.”
Gross has previously expressed his skepticism about Trump’s effect on the economy, saying after the election that Americans took a “wrong turn.”
Finally, Gross offered his outlook on the US 10-year Treasury yield, saying he is skeptical of its rise since the election of Trump but that bonds could actually break into a bear market if it breaks a key support level.
Gross noted that bonds have been in a 30-year bull market, with the 10-year yield dropping to a low of 1.36% in July. However, if the downward trend broke a key level, according to Gross, it could mean that the multidecade market has shifted. From the letter (emphasis added):
“Now, however, this super strong, frequently tested downward trend line is at risk of being broken. 2.55% to 2.60% is the current “top” of this trend line, and over the past few weeks, it has held and reversed lower by 15 basis points or so.
“BUT———-. And this is my only forecast for the 10-year in 2017. If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the dollar/euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017.”
So there it is – Bill Gross’ musings on Africa as it relates to life itself, Trump’s effect on the US economy, and a key technical level for the US Treasury 10-year yield.