Investing legend Bill Gross: “Our financial markets have become a Vegas/Macau/Monte Carlo casino”

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Mr. Gross is not the first one to observe this and it is a tragic observation.

(From Janus Capital)

Ultimately though, in broader more subjective terms, it is capitalism itself that is threatened by the ongoing Martingale strategies of central banks. As central bank purchases grow, and negative/ zero interest rate policies persist, they will increasingly inhibit capitalism from carrying out its primary function – the effective allocation of resources based upon return relative to risk. At PIMCO Christmas parties past, I used to praise my fellow employees for their part in the ongoing process of capital allocation. Yes, we were prosperous, I admitted, but we were helping the global economy and over 8 billion people to prosper as well – eliminating the deadwood, fostering new growth, and anticipating future headwinds. That can no longer be true – at PIMCO, Janus, or any other financial institution. Central bankers have fostered a casino like atmosphere where savers/investors are presented with a Hobson’s Choice, or perhaps a more damaging Sophie’s Choice of participating (or not) in markets previously beyond prior imagination. Investors/savers are now scrappin’ like mongrel dogs for tidbits of return at the zero bound. This cannot end well.

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