Yield of Dreams

If Bill Gross Hates Baseball So Much, Why Use It as an Analogy?

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If I hear a man use one more cliché sports metaphor to get an investment point across, I’m going to scream. Thanks, Bill Gross. 

In Bill Gross’s recent investment outlook “Seventh Inning Stretch,” the PIMCO founder starts by expressing his hatred of baseball, calling it “the most boring game in the world next to cricket.” (I’ll admit, I’m a fan of the old pastime.) Fair, but he then proceeds to use the game as the metaphor for his entire argument! If he hates baseball so much, why not use cricket? Or, here’s a novel idea, why not ditch the cheesy sports metaphors altogether?

Don’t get me wrong. Gross’s commentary is full of good points, worth noting here. In it, Gross argues that Hyman Minsky’s approach to stabilizing the economy—which was for “Big Bank” and “Big Government” to temporarily and artificially pump up the economy and markets—does not work in the new normal that we’re living in. What would normally lure investors back into the markets has instead caused them to “derisk,” Gross said.

What perhaps Minsky couldn’t conceive of was the point at which debt, deficits and interest rates would go to such extremes that the creation of credit itself, which was and remains the heart of capitalism, would be threatened.

Gross calls for Minsky’s approach to be updated, and for investors to turn not to stocks, but to safer, front-end positions in Treasuries, because of the Federal Reserve’s “forward guidance.”

His points are well-taken, but to me, they’re ever-so-slightly less credible under the guise of the baseball analogy.

Take these examples:

In short, and in too-abbreviated summation, debt-laden economies with near-zero-bound interest rates became victims of their own excess, a condition that was more difficult to stabilize cyclically because Big Government and Big Bank had reached limits, and private market investors with huge portfolios of their own began to leave the ballpark early. Why stick around if your team is down by seven runs with only a few innings left?

Call it retail, call it Mom & Pop with their 401(k)s, but they all have a host of choices at today’s ballpark snack bar. Bonds, stocks, cash – emerging/developed – euros, dollars, pesos. Sounds like a good game to play, does it not?

… how do you play on this rather unstable field of our own making? Which pitch do you swing at? ... The safest pitch to swing at may not be stocks but the asset that will soon be the nearly sole focus of central banks.

This provided a much-needed outlook on capitalism and the bond market, but next time, spare me the clichés.

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Casting a gimlet-eye on asset management issues.

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