October 2, 2013

Beautiful Deleveraging per Bill Gross

Earlier Ray Dalio  explained Fed’s beautiful deleveraging of the economy. Now, PIMCO’s Bill Gross adds to the same discussion 

Ray Dalio and company at Bridgewater have the concept down pat. The objective, Dalio writes, is to achieve a “beautiful deleveraging,” which assumes minimal defaults and an eventual return of investors’ willingness to take risk again. The beautiful deleveraging of course takes place at the expense of private market savers via financially repressed interest rates, but what the heck. Beauty is in the eye of the beholder and if the Fed’s (and Dalio’s) objective is to grow normally again, then there is likely no more beautiful or deleveraging solution than one that is accomplished via abnormally low interest rates for a long, long time.

His recommendation 
Focus on front-end yields, because the Fed can’t raise policy rates in a levered economy.


Tags: beautiful deleveraging of economy, ray dalio vs bill gross, bridgewater vs pimco, beautiful deleveraging