Daily Brief - Bill Gross says we’re living in ‘investing dreamland’ (Nov 17, 2021)

Say one thing for Bill Gross, say he’s a colorful man.

(If you can identify the book from which we took this expression, we have a special prize for you)

The first law of being an investment celebrity is to make bold pronouncements. If they prove correct, you look like a genius. If they prove incorrect, they are soon forgotten. So as a broad rule, you should take statements from celebrity investors with a pinch of salt.

But this time Bill might be onto something.

I think [Fed chair Jay Powell] is captive to the financial markets, and so he will gradually creep out of buying bonds, and next year he maybe gradually raises interest rates

The Fed mandate is to promote maximum employment, stable prices, and moderate long term interest rates. It appears that the borders between price stability and financial stability have been blurred beyond recognition.

Financial market volatility is routinely mentioned in FOMC statements, and the Fed has shown willingness to use QE to its full extent to ensure low volatility in economic outcomes.

That worked well up to now. In fact, that worked GREAT.

Markets are at all time high, employment is robust and we are riding the recovery as if the COVID slowdown never happened. If only inflation was not rising so much.

Which brings us to the takeaway of this daily brief: keep an eye on inflation on December 10th.

If the Fed Leading Indicator for inflation proves correct, inflation will retrace and we’ll enjoy more easy monetary policy. If prices keep rising...it will be an interesting time.

Track inflation here in TOGGLE: https://toggle.ai/chart/us/us.cpi_yoy.

For more on this topic, please head to the Financial Times for this piece by Robin Wigglesworth.