*from www.bloomberg.com, Mar. 5, 2013 (To view original article click here.)
Take Away #1: Pacific Investment Management Co.’s Bill Gross said the yen is likely to weaken to 100 per U.S. dollar on concern stimulus measures by the Bank of Japan will debase the currency.
Key Facts and Figures:
- Pimco’s Bill Gross manages the world’s largest bond fund.
- Gross says, “We’re going to see a lot of printing of yen” and that “You want to avoid the currency that prints the most, that endorses quantitative easing to the fullest extent.”
- The yen has tumbled 16% in the past six months as Japanese Prime Minister Shinzo Abe pushed to weaken the currency and defeat deflation.
- Analysts from Nomura Holdings Inc. to Mizuho Securities Co. forecast that the Bank of Japan may add monetary policy stimulus as soon as its April 3-4 policy meeting.
Take Away #2: Gross says the pound will also fall because of quantitative easing.
Key Facts and Figures:
- Sterling tumbled 6.7% vs. the dollar this year through February, touching the weakest level in almost three years.
- Despite the fall it remains 2.4% overvalued, based on an Organization for Economic Cooperation and Development measure of purchasing power parity.
- A weaker currency typically boosts exporters’ competitiveness while making imported goods costlier.
Take Away #3: Pimco favors the Brazilian real and reiterates that investors should avoid U.S. Treasuries maturing in 10 and 30 years.
Key Facts and Figures:
- Gross says to look to the U.S. dollar and euro for relative strength.
- The yen gained 0.15 to 93.35 per dollar at 12:45 p.m. in New York.
- The yen is expected to 95 per dollar by the end of the year.
Take Away #4: Gross, who believes that asset-price irrationality is rising after years of record low benchmark interest rates, says the U.S. Economy has to have real growth of 3% to justify the current market enthusiasm.
Key Facts and Figures:
- GDP is forecast to increase 1.8% in 2013.
- Enthusiasm today graded on the degree of irrationality is about a “six plus or seven minus” on a scale of 1-10, says Gross.
- Market is moving closer to irrational exuberance, but not necessarily irrational yet, says Gross.
- The Dow Jones Industrial Average rose to an all-time closing high today, gaining as much as 1.1% to 14,286.37.
- The $288 billion Total Return Fund managed by Gross gained 7.41 percent over the past year, beating 94% of its peers according to data compiled by Bloomberg.
*To view original article from www.bloomberg.com click here.