[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.] ‘Gross: Global yields lowest in 500 years of recorded history. $10 trillion of neg. rate bonds. This is a supernova that will explode one day.’ – Tweet from Janus Capital.
Bill Gross’ warning is, of course, tautological. A supernova is an exploding star. What he probably meant to say is that the bond market is a star that will turn into a supernova one day. But then so what? At some point our own sun will die and the planet Earth will likely be engulfed by it as it explodes. Since that’s not likely to happen for roughly 5 billion years, we can probably renew our monthly travel cards with a sense of equanimity.
But then Bill Gross has form here. It was Bill Gross, modeller of sunglasses and billionaire bond investor, who suggested back in January 2010 that the UK Gilt market was ‘a must to avoid’ and that UK Gilts were ‘resting on a bed of nitroglycerine.’
In January 2010, 10 year Gilts yielded 4%. They now yield roughly 1.25%. In 2010, the UK national debt was just under 1 trillion. It now stands at over 1.6 trillion. If Gilts were resting on a bed of nitroglycerine six years ago, they are now bouncing up and down, in spiked running shoes, on a bed of picric acid and octanitrocubane whilst firing flaming napalm arrows at a dartboard made of pure antimatter.
This post was published at Sovereign Man on June 13, 2016.
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