Bill Gross continues to believe that the overall situation is a very complicated one. In its latest publication the formerly known as the king of bonds warns of a demographic boom.
Gross believes that Fantasy Sports, cellphone game apps, sexting, and fast food are the new era “Cake” and “day at the Coliseum” to appease the masses. Used to distract the population of an incipient growth in the value of wages, and manipulation of monetary policies for Wealthy corporations... “It’s a wonderful life for the 1% and a Xanax existence for the 99".
According to the investor, in the 2016 US elections nothing will change. However, the demographic situation in his country, should change the direction of financial markets in the not too distant future. "I speak specifically though to liabilities associated with the Boomer generation: healthcare, private pensions, Social Security and the unestimable costs of global warming," Gross mentioned before emphasizing that the U.S. government has current outstanding debt of approximately $16 Trillion or close to 100% GDP, but that the present value of programs such as Medicaid, Medicare and other social totals $66 trillion or another 400% of GDP.
Looking ahead to the construction of portfolios, Gross believes that-taking into account that developing countries have a younger population, “then developed nations could and should transfer an increasing percentage of their financial assets to emerging markets to help foot the demographic bills back home. Long-term then, as opposed to currently, think about increasing your asset allocation to the developing world… It’s also commonsensical that if higher Millennial wages are the probable result of a shortage of healthcare workers relative to Boomer requirements, then an investor should go long inflation and short fixed coupons.” U.S. 10-year TIPS at 80 basis points seem like a good hedge in that regard. Looking at particular sectors, Gross is optimistic about the healthcare sector, and believes that insurance companies as well as the bonds of underfunded cities and states such as Chicago and Illinois have a bleak future.
To conclude the manager mentioned that if you think things are bad today, the coming decades will be even worse and "extra dose of Xanax" will be needed.
You can read the Outlook on the following link.