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View the article online at http://citywire.co.uk/wealth-manager/article/a732500

Bill Gross: now is not time to be greedy

by Atholl Simpson on Feb 06, 2014 at 12:52

‘In our modern financial economy, credit is anything that can be transferred on a wire or a computer from one account to another and ultimately be used as the basis for spending money on things such as groceries or airplane tickets.’

‘Credit creation or credit destruction is really the fundamental force that changes P/Es, risk premiums, natural interest rates, etc. ‘

‘The amount of credit and its growth rate are critical to asset prices, and of course asset prices in our modern economy are critical to growth and job creation and future prospects for investment.’

In pre-Lehman times credit used to grow at 8-10% a year, he said, but now only grows at 3-4%. Part of that growth is due to the government itself with recent deficit spending, he added, and a 3–4% credit expansion in the US may not be enough to maintain 3% growth, especially if asset prices go down and velocity, the circulation and trading of credit, is affected.

To read the full version of Bill Gross's February 2014 Investment Outlook click here.

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