Keith Fitz-Gerald: Anybody Listening to Bill Gross Is "Probably Headed to the Poorhouse"

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Bill Gross' Pimco, which manages the world's largest bond fund, predicted earlier this week there's a more than 60% chance of a recession in three to five years.

"Given that the last global recession was four years ago, and also given that the global economy is significantly more indebted today than it was four years ago, we believe there is now a greater than 60 percent probability that we will experience another global recession in the next three to five years," Saumil H. Parikh, a managing director and generalist portfolio manager at Pimco, said in a note Tuesday.

But Money Morning Chief Investment Strategist Keith Fitz-Gerald took issue with the prediction from Gross' firm during an appearance on Fox Business' "Varney & Co."

Keith also said stocks haven't peaked – and won't as long as the Fed keeps printing money.

Check out the accompanying video to see why Keith doesn't exactly see eye-to-eye with the Bond King.

Join the conversation. Click here to jump to comments…

  1. H. Craig Bradley | June 14, 2013

    AMERICANS ARE BLASE ABOUT POLITICS AND POLICY

    The reference to the "American people getting on with their business" ( activities) is unavoidable, while Washington Politicians have a whole different idea about what "work" is. Being unaccountable is not particularly helpful either. The American people these days have little interest in public policy or "politics". Can you blame them?

    Well, I can say that people in my neighborhood are very blase about government, politics, and public policy (taxes). For example, a retired accountant down the street commented that a recently proposed city electricity rate increase of 24% was "over five years". My math suggests that's an average increase of 4.8%/year, quite a bit higher than Ben Bernanke's 2% annual core inflation rate target. All the essentials that every household must have are going up at a similar rate, as well.

  2. H. Craig Bradley | June 14, 2013

    Sidelined investors will end up in the poor house? Are you kidding? Nobody in their right mind would ever go "all in" in today's manipulated market, monetary system, and economy. Its fractured. Remember, investing is an art. Who is looking just three years out? Not many that I can see anyway.

    Let's take a good dividend stock like Johnson & Johnson, currently paying a 3.1% dividend and priced at a rich $85.0/share ( PE of 23). What will happen to dividend stock valuations when interest rates eventually move up to just 3%-4%? I foresee stock prices resetting to offer competitive dividend rates at that time. This probably means at some point down the road cheaper stocks at lower P/E ratios.

    So, sitting on the sidelines with lots of cash ( NOT "All Out" either) is smart investing. Its just as good a long term approach as buying with the crowd or because its perceived to be "the only game in town". Its not. Gold is a separate alternative asset class that might really take off from today's lows for all I know. Most people will miss it if indeed gold surprises to the upside in a big way over the next few years. ( Mike Maloney)

  3. enthusceptic | June 14, 2013

    How can bonds beat stocks? Someone please explain…

    • H. Craig Bradley | June 15, 2013

      COMPETITION

      When bonds pay out 4% or one year C.D.'s pay 4%, then investors who want return and less risk may go for the bonds instead of the dividend stocks. So, the dividend stocks will have to be reset so their dividend rate is higher. This necessitates a share price revaluation. This would be the traditional interest rate cycle. Problem is, will it apply in our current environment?

      Some pundits maintain that the central banks simply can not allow interest rates to ever go up. When interest rates go up, all the money U.S. BANKERS have invested in bonds will depreciate (lose capital). Banks will weaken and have to issue more shares. Share dilution will reduce the value of outstanding bank shares. Financials and the markets will decline, setting up a domino reaction of stocks, real estate, and government spending reductions. This could cause dreaded deflation. This is why I think the FED is in a panic right now. They know their days and ours are numbered.

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