Bill Gross: "We See Bubbles Everywhere"

It is only logical that when one of the smarter people in finance warns that he “sees bubbles everywhere” that he should be roundly ignored by those who have no choice but to dance. Because Bernanke and company are still playing the music with the volume on Max, and if not for POMO there is always FOMO. However, if there is any doubt why this “rally is the most hated ever”, here are some insights from the Bond King from an interview with Bloomberg TV earlier today: “We see bubbles everywhere, and that is not to be dramatic and not to suggest they will pop immediately. I just suggested in the bond market with a bubble in treasuries and bubble in narrow credit spreads and high-yield prices, that perhaps there is a significant distortion there. Having said that, it suggests that as long as the FED and Bank of Japan and other Central Banks keep writing checks and do not withdraw, then the bubble can be supported as in blowing bubbles. They are blowing bubbles. When that stops there will be repercussions. It doesn’t mean something like 2008 but the potential end of the bull markets everywhere. Not just in the bond market but in the stock market as well and a developing one in the house market as well.”

As a gentle reminder, the reason why nobody anywhere trusts this particular bubble – the biggest in history – is not because speculators are not greedy (they are), or because everyone knows the market is always one central planner wrong move away from a collapse which would make the 2009 lows seem like amateur hour (it is), but because, as Seth Klarman explained two weeks ago, it is the Fed itself which by pushing on a string and the economy constantly deteriorating, proves it has no idea how to make things better: “When you tell the populace that we can all enjoy a free lunch of extremely low interest rates, massive Fed purchases of mounting treasury issuance, trillions of dollars of expansion in the Fed’s balance sheet, and huge deficits far into the future, they are highly skeptical not because they know precisely what will happen but because they are sure that no one else–even, or perhaps especially, the  policymakers—does either.”

And today from Bill, on the reason why QE is not working as intended, and why the Fed’s channels are not only clogged but never worked as intended in the past four years: “Does it mean it is a good thing that capitalism should thrive under this quantitative easing posture on the part of central banks that distorts markets and this court’s capitalism and promotes a zombie corporations and lowers net interest margins and destroys business model? All of that is the negative aspects of quantitative easing. Can we live with? I do not think this will be with us for a long time.”

One can hope.

Some other observations from Gross:

continue article at ZeroHedge:

http://www.zerohedge.com/news/2013-05-16/russian-pacific-fleet-warships-enter-mediterranean-first-time-decades