what does PIMCO know?
PIMCO's Mark Kiesel sold his house in 2005 and rents his living space.
Alan Greenspan is now a consultant for PIMCO, announced yesterday:
link
Alan Greenspan is now a consultant for PIMCO, announced yesterday:
link
Investment Strategy
At PIMCO, we have anticipated the warning signs in housing and positioned our portfolios accordingly. Our duration is above index with an emphasis on the front-end of the U.S. yield curve given our view that short-term interest rates should trend lower. Our overall credit exposure is under-weight with a cautious stance on cyclical industries such as home builders, paper, building products, home appliances and retailers. Industries we favor include energy, refining, pipelines, utilities, rails, cable, metals and mining, healthcare and telecom. Given today's environment of tight credit spreads, poor covenant protection and heightened event risk and economic uncertainty, we believe our conservative investment strategy makes sense, especially given our more negative views on housing.
Housing is today's leading indicator of economic growth and risk appetite. An extended downturn in housing will likely lead to slower job creation, softer corporate profit growth, tighter lending standards and weaker consumer and business confidence. The Fed should lower the Fed Funds rate as soon as we have confirmation that the employment situation is deteriorating. By that time, credit spreads will have already anticipated the fact that risk appetite is set to turn for the worse.
For renters and potential homebuyers, my advice is to still rent. The housing market has turned for the worse but the unwinding of this bubble will take more time. Unfortunately, this is not good news for the U.S. economy, job creation or corporate profits. Nevertheless, investors who are patient and adopt a conservative investment strategy should prosper over the next few years.
Mark Kiesel
April 12, 2007
Comments
However, ultimately they're business depends on being bullish on bond prices, hence their predictions/forecasts have a bias towards yields remaining low.
This is where I see some "explaining away" the impact of the deteriorating domestic credit market. However, they are an international bond fund, so it very well could be the case that a limited fallout in some of the US bond markets may have little impact on their overall outlook.
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