Popular Tags


Bill Gross: ʺBitcoin and blockchain may counter central banksʺ

New financial technologies such as Bitcoin may become more attractive to investors as a protection against low and negative interest rates policies of central banks that threatens capitalism.

Policies of the Federal Reserve, Bank of Japan and European Central Bank are destroying historical business models that foster savings, investment and economic growth. Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, is sure about that. His view had been expressed in an October investment review, issued on Thursday. He said that investors lose faith in the system and this is the reason why they seek havens.

ʺBitcoin and private blockchains, supported by a small group of major banks, are just a few examples of attempts to stabilize the value of their current assets, when the system changes,ʺ he wrote. ʺGold is another example, a historic relic as it is. In any case, it is an attempt to challenge the current system.ʺ

Blockchain is the technology underlying bitcoin, a digital currency that uses encryption techniques to generate new money and verify transfers, independent of a central bank. Two senators of the US Congress formed an alliance last month to promote the idea that cryptocurrency and its operations must be protected by the law.

"Casino" Atmosphere

Central banks are acting like casino gamblers who double down on bets every time they lose. Gross thinks that this strategy works as long as they have right to print unlimited amounts of money. The approach, when debt increase has to stimulate growth of the economy, does not work and investors, looking for the way to save their money, have to invest in risky assets, he wrote.

ʺCentral bankers have fostered a casino-like atmosphere where savers and investors have to choose between equal proposals (Hobson’s choice) or between two bad proposals (Sophie’s Choice), Gross wrote. ʺInvestors and savers do not get a bond yield. It will not end well.ʺ

In a tweet posted Tuesday, Gross warned: ʺ ECB Taper Tantrum underway. Bearish for Global bonds.ʺ

European Central Bank officials have reached an informal consensus to wind down bond purchases which volume exceeds 80 billion euros ($90 billion) a month and it says that the economy is not stimulated enough, Bloomberg reported.

The same taper tantrum occurred in the US bond market in 2013 when Ben Barnanke, who was the Chairman of Federal Reserve, reported on a reduction in purchase of bonds and mortgages.

Gross’s fund provided 5% of revenue this year and it is 66% more than Bloomberg’s fund. The bond yield was 4% last year after Gross’s company merged with Pacific Investment Management Company in October 2014.

Janus Capital Group Inc. announced on Monday that it was merging with London-based Henderson Group Plc to form a $320 billion asset manager.


  • October 27, 2016 11:31 AM MSK