Bill Gross Investment Outlook: Bonds, Men, It’s About Time
Women have gotten the short stick or metaphorically the short rib ever since Eve, and I’m with Oprah for president and much, much more but hey, guys have got a few positive qualities that need to be mentioned. I mean when basketball players miss a free throw these days, they still get “low fives” from all their teammates. So here are a few low fives for men, men, men.
- Men need fewer pairs of shoes and purses.
- Men live 10 years less on average. They truly are the weaker sex. Feel sorry for ‘em ladies, not angry.
- Men shouldn’t be criticized for not putting the toilet seat down. If they need to put it down, hey will. If women do too, they can use their foot just like everyone else.
- Men run faster, jump higher and are much better at not communicating.
- Sure men start wars but great things actually are a result of them. Canned foods owe their origin to Napoleon, microwave ovens to the invention of radar during WWII, and the Internet (not Al Gore) to the fear of Russia bombing U.S. telephone lines during the Cold War. Way to go guys. Keep starting those wars.
- Men always know where the remote control is. Right next to them.
I could go on and on. I won’t. I don’t dare. Actually most of the world’s problems would go away if men just stayed home, watched football and learned to talk to their partners during commercial breaks. There are certainly enough of them.
Bonds, like men, are in a bear market. For both, it’s hard to say when it all began. There was no Helen Reddy “I Am Woman” moment back in June 2012, and then again in July 2016 when the 10 year Treasury double-bottomed at 1.45%, but then in retrospect it should have been obvious that for bonds, like men – “their time was up”. Eighteen months ago, it was obvious to most observers that the economy, measured by nominal GDP, was not going to go much lower than 3% and that the Fed was having second thoughts about quantitative easing. A 1.45% 10 year was at that time set up for perpetual QE and the possibility of a deflationary collapse in the economy. Neither condition prevailed, and so 1.45% for tens can legitimately be cited as the end of the bond bull market which began at 15.8% in 1981 and provided prescient portfolio managers with the potential for huge capital gains and the moniker of “total return”, which previously had been the sole bastion of stocks and real estate.
Still, it is not quite legitimate to mark those yield bottoms as the beginning of a bear market. Although the 10 year rose from that point to plateau for several years around 2-2.25%, the price loss of 6 points or so was really not enough to even hint at the late 1970’s bond characterization of “certificates of confiscation”. Even indexed portfolios which included a mild percentage of HY bonds could show a total return of 5% or so in 2017 for instance. Aging boomer bond market investors were disappointed that they had not ridden the equity express, but hey, 5% ain’t that bad.