Bill Gross on Janet Yellen’s Speech: “This is Not Capitalism”

Bond investing legend Bill Gross of Janus Capital Group Inc. had some choice words today when Bloomberg asked him to comment on Fed chair Janet Yellen’s big Jackson Hole speech.

From Bloomberg:

[Gross] criticized Fed Chair Janet Yellen’s suggestion that she could consider further asset purchases as the equivalent of “providing a walker or a wheelchair for an ailing economy.”

Yellen, speaking Friday at a conference of central bankers and economists in Jackson Hole, Wyoming, said while the U.S. economy has strengthened to the point that interest rate hikes are possible, further asset purchases must remain part of the Fed’s toolkit. Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, has long criticized central bankers in the U.S., Europe and Japan for keeping interest rates ultra-low and artificially inflating asset prices without adding sustainable economic growth.

“She is opening the door to creating even greater asset bubbles as have the BOJ and ECB and SNB by purchasing corporate bonds and stocks,” Gross wrote Friday in an e-mail response to questions. “This is not capitalism. This is providing a walker or a wheelchair for an ailing economy. It may never walk normally again if monetary policy continues in this direction.”

Still, Gross thinks that a rate hike next month could still happen:

“To the extent that next month we see a decent job growth number, then I think for sure or close to for sure, you know, in September we’re going to see a Fed hike of 25 basis points,” Gross said in an interview on CNBC. “The market hadn’t expected that.”

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The iShares Barclays 20+ Yr Treasury Bond ETF (NASDAQ:TLT) fell $0.24 (-0.17%) to $138.93 in volatile whipsaw trading today. The largest ETF tied to long-term U.S. government bond interest rates has risen 15% since the start of 2016.

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