Posts Tagged ‘ECB’

Captain Rick: PIMCO’s Bill Gross says that ultra low interest rate policies and ongoing bond buying programs like ‘Quantitative Easing’ around the world aren’t working. Bill refers to it as a global financial system that is "beginning to resemble a leukemia patient with New Age chemotherapy, desperately attempting to cure an economy that requires structural as opposed monetary solutions." He is challenging the Federal Reserve and other central banks to become part of the solution rather than part of the problem.

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Bill Gross, founder and co-chief investment officer of bond giant PIMCO. He is often called the world’s ‘bond king’.

I recognize Bill as one of the worlds most intelligent minds concerning everything related to bonds. Bonds help make our world grow. Bonds are the life blood of our cities, states and countries of our world. 

Bill writes a monthly ‘Investment Outlook’ news letter. His June report is entitled “Wounded Heart”, a nod to Bonnie Raitt’s 2002 tune. It is one of his finest. I will do my best to sum up his eloquent words of wisdom for the U.S. and other countries including Japan, England and Europe who are practicing ‘Quantitative Easing’ fiscal programs that are not working.

Excerpts from Bills “Wounded Heart” report:

“While the global central banks’ policies have stabilized economies, they haven’t succeeded in returning them to old normal growth rates”

"There comes a point when no matter how much blood is being pumped through the system as it is now, with zero-based policy rates and global quantitative easing programs, that the blood itself may become anemic, oxygen-starved, or even leukemic, with white blood cells destroying more productive red cell counterparts"

And to Fed chief Ben Bernanke’s claims that once economic growth has been restored to normal levels, financial markets can also return to normal interest rates and returns, Gross has a few stern words:
"Well it’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%"
"Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution."

To investors, Gross advises to reduce risk as the Fed continues to try to mend a wounded heart with blood that lacks the necessary oxygen. "Investors should look for a pacemaker to follow a less risky, lower returning, but more life sustaining path."

Read the entire Investment Outlook: “Wounded Heart”  by William H. Gross:  http://www.pimco.com/EN/Insights/Pages/Wounded-Heart.aspx

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Associated ATRIDIM NEWS JOURNAL Report Categories:

Fed Financial Policy: https://atridim.wordpress.com/category/fed-financial-policy/

Investment 101: https://atridim.wordpress.com/category/investment-101/

Stock and Bond Market: https://atridim.wordpress.com/category/stock-bond-market/

Captain Rick: The 17-nation Eurozone economy contracted for a record sixth consecutive quarter, making this the longest period of recession in the Eurozone’s history. The recession has depressed business confidence, sent unemployment to record highs, inflation to record lows and blown attempts to cut government record debt.

Gross domestic product in the Eurozone fell by 0.2% in the first quarter. The GDP estimate was worse than economists were expecting, largely due to disappointing growth in Germany and could increase pressure on the ECB to take further action to try to stimulate activity.

Unemployment continues to hit new record highs. Unemployment broke through 12% for the first time in March, meaning 19.2 million people were without work in the Eurozone, 1.7 million more than a year ago.
Youth unemployment rose sharply, hitting 24% and leaving 3.6 million people under 25 looking for work.

Prices slumped and inflation has fallen way below the central bank’s target. Inflation posted its biggest monthly drop in four years in April. It fell to 1.2% and touched its lowest level since February 2010.

Eurozone debt hit 8.6 trillion euros, a record 90% of GDP, last year and is forecast to rise to 95% in 2013. As bad as this is … in contrast, U.S. debt to GDP ratio is 107%, trumping it as the worlds worst. One has to wonder if America is next in line to experience the hardships facing those in the Eurozone.

Future Concern: Economists are becoming increasingly concerned at the growing divergence between France and Germany, historically the twin motors of the EU economy and political integration.

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France: French President Francois Hollande (shown above) who was elected a year ago after campaigning to put growth before austerity and introduce higher taxes on the rich, has seen his approval ratings fall sharply as unemployment continues to climb. In recent months he has begun to reform labor markets and pensions, and announced plans to cut capital gains tax. But he is moving too slowly for some, and his government continues to send mixed messages.

France, the Eurozone’s second-biggest economy, slipped back into recession. Its output fell by 0.2% for a second consecutive quarter as it suffered from weak exports and falling investment.  France faces a heavy financial burden from its labor unions and pension systems.

Italy: The pace of contraction eased. GDP shrank by 0.5% in the quarter.
Italy, the region’s third largest economy, nominated a new prime minister. Enrico Letta is a pro-European from Italy’s center-left. He wants Europe to ease up on austerity.

Spain: The recession deepened in the first quarter. The economy contracted by 2% compared with the same period a year ago, and by 0.5% compared with the final quarter of 2012. Spain has been stuck in recession for 21 months. It has been given two more years to bring its budget deficit to below 3% of gross domestic product. In contrast, the U.S. deficit ratio is 6.5% of GDP … more than twice as bad. One has to wonder if America is next in line to experience the hardships facing those in the Eurozone.

The number of unemployed in Spain broke the 6 million barrier during the first quarter, a new record. The unemployment rate rose to 27.2%, tied with Greece for the Eurozone’s highest. For Spaniards aged 16 to 24, the unemployment rate is 57.2%.

Greece: The jobless rate was 27.2% for January, tied with Spain for the Eurozone’s highest. In Greece, 34.2% individuals aged 25 to 34 are unemployed. It’s even worse for younger workers — 59.3% of Greeks aged 15 to 24 are out of work.

Portugal: Portugal was able to slow the pace of contraction to 0.3% from 1.8% in the fourth quarter.

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Info from previous reports:

European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

Europe: https://atridim.wordpress.com/category/europe/

France: https://atridim.wordpress.com/category/france/

Germany: https://atridim.wordpress.com/category/germany/

Greece: https://atridim.wordpress.com/category/greece/

Italy: https://atridim.wordpress.com/category/italy/

Portugal: https://atridim.wordpress.com/category/portugal/

Spain: https://atridim.wordpress.com/category/spain/

Home page (all reports): https://atridim.wordpress.com/