Financial Markets Have Become 'a Vegas Casino'

Postby Edwards Kings » Tue Oct 04, 2016 6:30 am

From a Reuters article I read:

Global central bank policy makers have turned world financial markets into a casino, thanks to their unprecedented monetary policies, warned bond investor Bill Gross of Janus Capital Group on Tuesday.

“Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today's highly levered world,” Gross said in his latest Investment Outlook titled “Doubling Down.”

Gross, who oversees the $1.5 billion Janus Global Unconstrained Bond Fund, recommended Bitcoin and gold for investors who are looking for places to preserve capital.

"At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives," Gross said.

Gross has been lambasting ultra-loose central bank policies for hindering global economies by keeping so-called "zombie" corporations alive and inhibiting "creative destruction."

For several years, Gross and others have warned that zero and negative interest rates not only fail to provide an easing cushion should recession occur, but they destroy capitalism's business models.

"A commonsensical observation made by yours truly and increasing numbers of economists, Fed members, and corporate CEOs (Jamie Dimon amongst them) would be that low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth," Gross said.

He added: "Our argument is that NIMs (net interest margins) for banks, and the solvency of insurance companies and pension funds with long dated and underfunded liabilities, have been negatively affected and that ultimately, the continuation of current monetary policies will lead to capital destruction as opposed to capital creation."

All told, Gross said central bankers have fostered a casino-like atmosphere that present “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.” end of article.

Time to tighten monetary policy? Who has the cojones to implement (intermediate term paid; long term growth)?
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Re: Financial Markets Have Become 'a Vegas Casino'

Postby KJ Duke » Tue Oct 11, 2016 3:32 pm

Edwards Kings wrote: Global central bank policy makers have turned world financial markets into a casino, thanks to their unprecedented monetary policies, warned bond investor Bill Gross of Janus Capital Group on Tuesday.

“Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today's highly levered world,” Gross said in his latest Investment Outlook titled “Doubling Down.”


I agree with him on what the central bank objective is, but the casino analogy makes little sense. Yes the global economy is leveraged, yes the central bankers are flooding the system with capital to keep the party going. But how does that make it a casino? It is what it is and has always been, just with greater leverage.

Edwards Kings wrote: "At some point investors – leery and indeed weary of receiving negative or near zero returns on their money, may at the margin desert the standard financial complex, for higher returning or better yet, less risky alternatives," Gross said. Gross, who oversees the $1.5 billion Janus Global Unconstrained Bond Fund, recommended Bitcoin and gold for investors who are looking for places to preserve capital.


Really? What's less risky ... bitcoin and gold are highly volatile assets and neither provide a yield. But gold is a decent hedge against currencies tanking.

Edwards Kings wrote: "A commonsensical observation made by yours truly and increasing numbers of economists, Fed members, and corporate CEOs (Jamie Dimon amongst them) would be that low/negative yields erode and in some cases destroy historical business models which foster savings/investment and ultimately economic growth," Gross said.


Jamie Dimon doesn't like it because it hurts banks; the least of my worries would be the business model of global banks.

Edwards Kings wrote: He added: "Our argument is that NIMs (net interest margins) for banks, and the solvency of insurance companies and pension funds with long dated and underfunded liabilities, have been negatively affected and that ultimately, the continuation of current monetary policies will lead to capital destruction as opposed to capital creation."


The economy has been badly mismanaged for decades, as have many of these financial institutions; low rates are a consequence of trying to keep the game going in the face of slowing growth resulting from demographics (a natural cycle) and horrendous gov't policies (the main problem). The FOMC and other Central Bankers, much like politicians, don't want to see things crash and burn on their watch. Their strategy is highly predictable and they are raising risk by using ever-greater leverage, but the underlying problem remains anti-business gov't policies and excessive gov't spending.

Edwards Kings wrote:
All told, Gross said central bankers have fostered a casino-like atmosphere that present “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.”

Time to tighten monetary policy? Who has the cojones to implement (intermediate term paid; long term growth)?


If rates rise substantially, the Federal budget blows up because of higher interest costs. The World is funding our deficit spending because the USD is still safer store of wealth relative to most others, and that has kept us going for many years. But at some point we will need to get fiscal discipline and have a Pres/Congress that understands how capitalism and business work, rather than just pander to every voting group or special interest and piss away gov't revenue on behalf of lobbys and ineffective subsidies.

The real casino aspect of the market is not the Fed ▬ it is the rise of asset allocation models, index funds, ETFs, robo-advisors, financial planners and brokers selling "wealth management products" which they (or their clients) don't understand are based on easily breakable historical models, and other synthetic securities that generate multiple levels of fees on behalf of banks at the expense of investors.

The entire market trades predominantly on the basis of these various baskets of securities now, which is exactly what led to the mortgage market blowing up about 6-7 years ago. That is the casino-like bet that investors are making.
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Re: Financial Markets Have Become 'a Vegas Casino'

Postby Edwards Kings » Thu Oct 13, 2016 3:57 am

Thanks KJ. As always, your insight is appreciated.

So, unless Congress stops spending like drunken sailors (apologies for offending drunken sailors) and we get a Chief Executive that understands and helps business (but not in a stupid way like rescinding Glass-Steagall which I know was not really aimed to help business but rather an unholy alliance between President Clinton I and a Republican Congress for the benefit of their banking buddies), we will continue in a pattern of bust, blame, and noise statutes in a sad repeating cycle?

Oh joy... :roll: I guess it is back to my old investing strategy...

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Re: Financial Markets Have Become 'a Vegas Casino'

Postby headhunters » Wed Nov 02, 2016 11:23 am

did gross just recommend bit coin? oh my god- he just sold is soul. gross was- at one time- highly respected. bill- you can raise rates- but they go up on that 20 trillion in debt. and wayne- STOP with the whole president- congress republican thing. the repubs are never going to balance the budget. imagine if they all stood up and said- "end entitlements". the dem president says fine- start with social securtity and medicare. are they gonna carry florida? no. the Midwest no the west and east- no. that ship has sailed. true story- my wife is an early voting election judge. a WOMEN walked in and said " I have never voted before- how do I vote for just TRUMP". the pollsters are gonna have a field day after this election is over.
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