Bill Gross on the Fed, Short Credit, Japan and more

By: Bloomberg

Janus Capital Management Fund Manager Bill Gross was interviewed by Erik Schatzker at the 2016 Blooomberg Fixed income Event at the Beverly Hills Hotel in California.

Gross shared his thoughts on: whether the Fed will move in June, how much that matters, Janus’ performance, trying to short credit, hedge fund fees, Japan’s fiscal policy and the currency market.

GROSS ON HOW MUCH IT MATTERS IF YELLEN RAISES RATES IN JUNE OR NOT

GROSS: “It doesn't matter if measured by a month or so, but it matters over time, and the critical question is, what is the appropriate real interest rate, or in nominal terms, with inflation, what's the appropriate short-term rate to contain inflation, to promote savings, and to allow the economy to grow at a respectable pace, and I don't think Janet Yellen or yours truly or anyone on the Fed really knows that because we're in a different world as opposed to 10, 20, 30 years ago.”

GROSS I THINK THE FED WILL MOVE RATES IN JUNE

GROSS: “I think they'll move in June. And I think that because the second quarter is looking decent, it's the two to three percent type of quarter, it's a comeback from the first quarter and jobs will probably be adequate in terms of growth and the dollar has gone down instead of up and the stock market is close to its peak, and so for all those reasons, financial conditions and real economic statistics, this is their time, if ever, to move. And I think Janet Yellen is more dovish than some of the governors and presidents.”

GROSS THERES AN INCREASING ARGUMENT FED SHOULDN’T BE SO OPEN

GROSS: “there's increasing argument now that they shouldn't be so open, that they shouldn't make so many speeches, that ultimately they confuse the market by this and that and her and him and -- I think there's a lot of Fed watching that should be categorized as white noise, but markets react almost instantly to a statement that suggests yes or no or slow or fast.

GROSS THE OBJECTIVE AT JANUS

GROSS: our objective at Janus is a three to five percent return. Doesn't sound great, much better than the stock market so far at least, so I think that's a realistic objective, but it has to be done recognizing that credit spreads and yields and that the yield curve and that stock PE's are all artificially elevated, how much everyone is uncertain,

GROSS TRYING TO SHORT CREDIT

“I've grown up and Buffett's grown up, and whether investors have grown up during a period of time in which markets have always snapped back and which carry and risk has always been validated going forward, so it's really hard to change your psychological makeup and to be a hedge manager that is comfortable with being short.”

GROSS ON HEDGE FUND FEES

GROSS: “You know, if markets only provide three or four percent, you know, they're taking more than half of the money that an investor gives them in terms of the annual profits. You know, things have to change and people have to wake up, that it's a different world now.”

**CREDIT: Bloomberg Television**

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