Connect with us

Business

Bill Gross’s resignation triggers concerns about the health of the market

Published

 on 

PHUKET: Bill Gross, regarded by many as the most successful bond investor of modern times, has just made a huge move by leaving the company and fund that he came to represent personally, which raises questions as to the implications this may have for the broader bond market. The timing does not seem to be a coincidence.

Why did he choose now to bail out on the enormous ship, the Pacific Investment Management Company (PIMCO) Total Return Fund, which he essentially built? Could he know that the immediate future holds some treacherous seas for investors to navigate, and with an unwieldy US$2 trillion that his firm manages, there will be no way to avoid getting smashed to bits on the rocks?

Keep in mind, this is the month the Fed will finally end its bond-buying program that has been in place since the financial crisis of 2008. For six years now, the central bank has been keeping the bond market on life support, and we are about to see what the patient is able to do on its own. It would be challenging to be at the helm of the world’s largest bond fund at this point in time.

What is really surprising is that every other bond trader in the world is likely to interpret this move as a lack of confidence in the market by the guru who has been making great returns from the bond market for more than thirty years. To some traders and investors, this is akin to Warren Buffet coming out and saying “sell stocks”. It can only be imagined that in the months to come there may be some serious fallout as institutional investors wonder if they should follow suit and get out before the crash ends up on their own track record. This kind of fear can spiral out of control and become a self-fulfilling prophecy.

Of course, the markets may not need Mr Gross. Interest rates are still held low with Yellen remaining firm that the policy from the Fed will continue to be flexible and dependent on what they see going on in the economy. Mr Gross may just be erring on the safe side, and we could still be a few years away from the reckoning day that is inevitable in the bond markets. The crystal ball still refuses to give any visions of the future, no matter how much time is spent polishing it.

For those who have big bond fund holdings, now may be the time to begin to adjust holdings and focus more on shorter duration funds. They may not be paying now, but if the longer-term market falls apart, there should be big inflows to the shorter-term side of the yield curve. The money has to go somewhere, after all.

David Mayes MBA lives in Phuket and provides wealth management services to expatriates around the globe, focusing on UK pension transfers. Faramond UK is regulated by the FCA and provides advice on taxation and pensions. He can be reached at david.m@faramond.com or 085-335 8573.

— David Mayes

 

Get more from The Thaiger

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Crime14 hours ago

Fans stage simulation of Tangmo’s death in protest of law activist’s defamation case

Thailand14 hours ago

Thai road sweepers get safer new uniform for work

Thailand14 hours ago

Thailand News Today | Police patrol Pattaya Beach looking for guns, booze, prostitutes

Sponsored23 hours ago

Starting a business and obtaining SMART Visa in Thailand is easy with Startup Booster

Phuket15 hours ago

4 Chinese fishermen lost at sea rescued near Phuket

Pattaya15 hours ago

Two lost children found on Pattaya’s Walking Street

Guides15 hours ago

5 underrated apps you need to use in Thailand this year

Join the conversation on the Thaiger Talk forums today!
Phuket15 hours ago

Cheeky Taoist procession spices up Phuket’s veggie fest

World16 hours ago

Avalanche strikes mountaineering team in Indian Himalayas, 4 killed

Cannabis16 hours ago

Can foreigners legally grow cannabis in Thailand?

Tourism16 hours ago

1-billion-baht tourism stimulus back on track

Thailand16 hours ago

Ordination ceremony concert goes on despite flood

Hot News16 hours ago

Flooding may impact Thailand’s tourism recovery

Road deaths17 hours ago

Young woman killed in hit-and-run in Chon Buri

Hot News17 hours ago

Myanmar youth artists hold art challenge to raise awareness of country’s plight

Entertainment17 hours ago

“One For the Road” film is Thailand’s 25th Oscar attempt

Thailand1 year ago

Morning Top Stories Thailand | Police to end protests, Human Trafficking | September 14

Thailand2 years ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism2 years ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket2 years ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism2 years ago

Phuket Thai food treats you need to try | VIDEO

Thailand2 years ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism2 years ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand2 years ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand2 years ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand2 years ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand2 years ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand2 years ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand2 years ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand2 years ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand2 years ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Trending