Bill Gross, founder of the giant investment firm Pimco, has an intense rant in his latest monthly note to investors. Though he defends the work of his own firm, he attacks the broader finance industry:
As a profession we have failed miserably at our primary function – the efficient and productive allocation of capital: The S&L debacle of the early 1980s, the Asian crisis, LTCM, dotcoms, subprimes, Lehman and the resurrection, instead of the reformation, of Wall Street, are major sins of the modern era of money. Hang your heads, moneychangers ...
Financiers have lost their high ground and, if truth be told, we began to lose it a long time ago when we figured out that money was more than a medium of exchange or a poor substitute for a store of value. We figured out a turbocharged way to make money with money and proclaimed ourselves geniuses in the process. Well, we're not. ... the only productive invention to come out of the banking industry over the past generation was the ATM.
Gross also attacks governments and central banks for engineering low interest rates.
... A low or negative real interest rate for an "extended period of time" is the most devilish of all policy tools. And the asset class holder that it affects, or better yet, "infects," is the small saver and institutions such as insurance companies and pension funds that hold long-term fixed income assets.
That "extended period of time" phrase is a reference to the Federal Reserve.
Gross argues in the note that the interest rate on U.S.bonds is far too low, and there are better options for bondholders' money. That's a big deal, because Pimco runs the world's biggest bond fund.
In January, the fund got rid of billions of dollars in U.S. Treasury bonds, according to a report this week in the FT.
Hat tip: WSJ