Thursday, March 31, 2011

Dow 5000: U.S. is Hellenic Banana Republic

The King of Newport Beach has been in the news alot lately promoting his positions of emerging market debt and attempting to convince the investing public that there is "little value" in U.S. Treasuries (since he publicly said his fund does not own them anymore).

Of course, he has made similiar hyperbolic arguments in the past. All is fair in love and war (and markets as well) so I cannot fault him for talking his book, and I think he knows better.

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said Treasuries “have little value” because of the growing U.S. debt burden.
The amounts the U.S. owes on its bonds, combined with obligations for Social Security, Medicare and Medicaid total about $75 trillion, Gross said in his monthly investment outlook, published on the Pimco website.
The U.S. will experience inflation, currency devaluation and low-to-negative interest rates relative to consumer-price gains if it doesn’t reform its entitlement programs, Gross said in the report. Gross “has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden,” he said.

“This country appears to have an off- balance-sheet, unrecorded debt burden of close to 500 percent of GDP. We are out-Greeking the Greeks.”

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