Bill Gross Issues Warning Signs for Banks, High-Yield and Long-Term Bonds

Banking, finance, and taxes

Published: March 3, 2016 1:40 pm

Last Updated: January 13, 2020 12:24 pm

Janus Capital Group Inc. (NYSE: JNS) has been home to Bill Gross for over a year now. Gross has been referred to as “The Bond King” for years. So what happens when the king of bonds warns investors that long-term bonds, banks and credit are all getting too risky? Is it possible that there is now no place to hide — maybe not even in cash?

This was the case laid out in the March 2016 monthly investment outlook. Gross’s monthly commentary has had similar warnings in the past, and the references here to the endless sun = credit was easier to follow than some of his more complex analogies and story-weaving efforts. While Gross went on to talk about the sun being the nourishment for the earth, it eventually will consume the earth.

Gross points out that among the things that deserve our attention in the here and now, one is finance-based capitalism and the assumption that the risk/reward historically inherent in it will be sufficient to drive economic growth forward.

With quantitative easing and negative interest rates, the concept of nurturing credit seems to have morphed into something destructive, as opposed to growth enhancing. Gross said:

Our global, credit based economic system appears to be in the process of devolving from a production oriented model to one which recycles finance for the benefit of financiers. Making money on money seems to be the system’s flickering objective. Our global financed-based economy is becoming increasingly dormant, not because people don’t want to work or technology isn’t producing better things, but because finance itself is burning out like our future Sun.