Month: July 2012

US oil may retest $100 as ‘Stimulus Drums’ beat louder

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Oil prices will likely gain this week on expectations that the US Federal Reserve may announce additional stimulus to help boost an anemic recovery in the world`s largest economy while markets are looking towards the European Central Bank to suppress unsustainably high sovereign borrowing costs in Spain and Italy, according to CNBC`s weekly survey of oil market sentiment.

The risk-on rally in global financial markets started on Thursday after ECB President Mario Draghi vowed that “within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” adding “believe me, it will be enough.”

Commodities rose the most in over a week on Friday but growing hopes for further global stimulus came too late to prevent the sector`s first weekly decline in over a month, Reuters reported. Oil rose for a fourth day, gold neared its highest since early May and copper rose more than 1%. US stocks climbed 2%.

Brent September crude (Intercontinental Exchange Europe: LCOCV1) rose USD 1.21 to settle at USD 106.47 a barrel on Friday but recorded a 36-cent loss for the week after four straight weekly gains.

“Fundamentally (prices) should fall but the stimulus drums are beating,” said Phil Flynn, Senior Energy Analyst for The PRICE Futures Group. Tom Weber at Portfolio Managers, Inc. Commodity Futures and Options in Los Angeles said he was looking for US crude futures to retest the “$100 area” this week. “Happy talk from Europe and the equity market`s wishful desire for a Fed commitment to QE will shift the investment tides to rising and shall lift all boats accordingly.”

Five out of 12 respondents, or about 42%, expect oil prices to rise this week; four expect prices to fall while the remaining three believe prices will remain around current levels, CNBC`s weekly survey of oil market sentiment shows.

IG Markets strategist Justin Harper in Singapore said expect the usual “QE3 buzz” to boost energy markets ahead of the Fed`s two-day FOMC meeting starting on Tuesday while the ECB`s Thursday meeting “may keep the stimulus bulls happy for another 24 hours.”

IG Markets` clients across the group are fairly bullish on oil, with 69% currently holding long positions, or bets that prices may rise, Harper said though added that any stimulus-led bounce may be blunted by the end of the week if the July US non-farm payrolls figures out on Friday print below forecasts. Consensus forecasts suggest the US economy created 100,000 new jobs in July.

Irrational Exuberance?

To be sure, markets should brace for a reversal should central bank action fall short of expectation and investors re-focus on the softer macro-economic background and the lingering threat that Greece may exit the euro zone.

Andrew Su, CEO of Sydney-based commodities trading and advisory firm Compass Global Markets said “the irrational exuberance” seen late last week should subside and US crude could ease towards USD 88.

“Fundamentally, inventory figures, production rates and product demand all continue to point to lower prices. We are completely comfortable with our new core short positions established at USD 88 this week” Su wrote in a report published on Friday. “Given that our previous core shorts from above USD 102 were exited in profit below USD 80, we have the luxury of monitoring our latest core positions with a greater leeway whilst we target an end of September price of USD 76.50.”

Warren Gilman, Chairman and CEO of CEF Holdings in Hong Kong suggested Brent crude`s move well-above the century mark was overdone.

“I am frankly stunned that Brent is trading over USD 100 given the global economic headwinds and the bad news that will in all likelihood emanate from the troika meetings in Greece over the next couple of days,” Gilman said.

Still, Gilman cautioned that there are upside risks. “There is always a risk of Iran saber rattling in the coming week which could have a short term impact but my bet is on the downside for the week given its relatively lofty level currently.”

“The floor for the oil market will be set by geopolitical risks, particularly in Syria and Iran,” wrote Michael Wittner, Head of Oil Market Research at Societe Generale in a report on July 25.

An “endgame” in the Syrian crisis raises the threat of “extreme instability” in the country, Wittner noted.

From a technical perspective, Daryl Guppy, CEO of Guppytraders.com said the charts suggested a bullish tone with US crude possibly testing resistance close to USD 98 to USD 100.

Meanwhile, Dhiren Sarin, Chief Technical strategist for Asia-Pac at Barclays Capital said there was a `neutral` overall for energy prices but saw “modest upside risk” for Bent crude within a range of between USD 101 and USD 108.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Are fiat currencies headed for a collapse?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the investment world eagerly awaits more stimulus, a debate on a previously unthinkable topic has started to emerge – can fiat currencies survive round after round of debasement?

Some heavy hitters say the answer is no.

A fiat currency derives its worth from the issuing government – it is not fixed in value to any objective standard. That means central banks can print as much money as they want. If an economy is struggling, injecting more notes into the system juices activity but lowers the value of the currency in question.

With major central banks all desperate to stimulate their economies, some say currencies have entered a dangerous new phase often described as a race to the bottom.

Mark Mobius, Executive Chairman of Templeton Emerging Markets Group, says investors will soon start to demand fiat currencies be backed by gold or other hard assets.

“It`s already happening, you`re beginning to see that trend with central banks stocking up on gold. The estimate is that at least half of the buying is central bank buying. They are looking to the day when they can say okay, our currency is backed by gold and therefore we`re a strong country,” Mobius told CNBC Asia.

Mobius has USD 50 billion under management.

Yu-Dee Chang, Chief Advisor at ACE Investment Strategists, says repeated stimulus is shortsighted. “If you keep printing money, sooner or later, we`re going to get in trouble. QE is good for the economy and for the market but the long-term effect is very much questionable,” said Chang.

But not everyone thinks fiat currencies are approaching their demise. Sean Callow, Senior Currency Strategist at Westpac Bank, says if there was going to be a melt-down, it would have happened by now.

“The bond market vigilantes have had every chance to punish the US for its huge fiscal deficits. The markets are confident in these currencies – the US dollar, the pound, and the yen in particular. That`s where the balance sheet expansion has occurred and yet those currencies have held up pretty well over the past couple of years,” said Callow.

As the fiat currency debate gains momentum and relevance, one London-based manager of a billion dollar fund says the answer about what lies ahead is in the past.

“Every single fiat currency in history has collapsed, this time will be no different.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is easy money eroding your wealth? Park 30% in gold

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investors would need to keep at least 10 to 30% of their portfolio in physical gold to preserve their wealth when money starts losing value amid expectations of further stimulus measures from major central banks, according to Juerg Kiener, Managing Director and Chief Investment Officer of Swiss Asia Capital.

The US Federal Reserve wraps up its two-day meeting on Wednesday and the European Central Bank (ECB) meets on Thursday. Traders are betting on action by the ECB after President Mario Draghi said last week that the bank was ready to do whatever was necessary, within its mandate, to save the euro.

On Friday, German Chancellor Angela Merkel and French President Francois Hollande said in a joint statement that they too were prepared to support the euro zone.

This will likely come in the form of bond buying and such injection of liquidity would hurt purchasing power, said Kiener, who expects stimulus measures “within the next six weeks.”

“Because the purchasing power of money is being totally destroyed during the monetization period, and if you look at the last few monetization periods, the purchasing power of the dollar lost about 30%,” Kiener told CNBC Asia`s “Squawk Box” on Monday. “So if you lose 30% within a short period, a 30% of something which preserves your purchasing power is actually equalizing your losses on the rest of your portfolio.”

Stocks ended Friday higher on Draghi`s comments after starting the week gripped by worries that Spain would need a full bailout. Yields on Spain`s 10-year government bonds dropped the most in seven months to 6.74%, amid speculation the ECB will accelerate efforts to ease the region`s sovereign debt crisis.

This shows that markets are expecting “fairly strong” action by the ECB, according to John Noonan, Senior Forex Analyst with Thomson Reuters in Sydney.

“The market is definitely pricing in a fairly strong action, certainly pricing in the ECB buying in the secondary-market Spanish and Italian bonds to keep those yields down and the (European Financial Stability Fund) coming in at the auctions themselves to also help out,” Noonan told CNBC. “I think they`re (ECB) going to be printing money like it`s going out of style at some stage.”

He said the ECB would like yields to decline to about 5.5% at least in the short term.

The Federal Reserve, on the other hand, may not embark on new quantitative easing this week, even if the US economy is showing signs of slowing down, having expanded 1.5% in the second quarter compared to 2% in the first quarter. The Fed are focusing on domestic problems now and want to keep ammunition to battle looming tax and spending issues, according to Tony Farnham, Economist and Analyst with Patersons Securities in Sydney.

“Everyone is waiting to see what happens with the (presidential) election (on November 6) and following from there, what ability and capability they have to go out and push back the so-called fiscal cliff,” Farnham said. “So I would believe that the Fed at this stage would not be wanting to use what bullets it`s got left on events overseas when it looks on his own turf and it`s got a few issues there.”

The fiscal cliff is when a host of tax cuts expire and automatic spending cuts go into effect at the end of the year. President Obama and his fellow Democrats have proposed extending the tax cuts for everyone except those making more than USD 250,000 in annual income while Republicans advocate extending the tax cuts for everyone.

Former Treasury secretaries Henry Paulson and Robert Rubin warned last week that if Congress could not agree on these issues by the end of the year, the tax increases and spending cuts will have dire consequences for the US economy.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Going for gold: How much is an Olympic medal worth?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Contrary to what the name might suggest, there’s actually not that much gold in a gold medal.  While the medal’s design is different for every Olympics, it must adhere to guidelines set by the Olympic Charter.

One of those guidelines states that at least 6 grams of gold must be used in each gold medal.

This year’s Olympic gold medal is comprised of 92.5% silver, just 1.34% gold, and the remainder 6.16%  is made up of copper.

The gold and silver medals weigh 412 grams, while the bonze weighs 357 grams.  Each medal is 85mm in diameter, and 8-10mm thick.  These are the biggest and heaviest medals ever produced for the Summer Olympic Games.

So what is the gold medal worth at today’s prices?

We crunched the numbers and with today’s spot prices and a weight of 412 grams the London 2012 gold medal is worth USD 647.6532.

Production

Eight tons of gold, silver, and copper has been mined by Olympic Partner sponsor Rio Tinto at Kennecott Utah Copper Mine near Salt Lake City, Utah as well as the Oyu Tolgoi project in Mongolia.

The 4,700 medals, including Olympic and Paralympic medals, were made at the Royal Mint headquarters in Llanstisant, South Wales and are housed in the vaults of the Tower of London. Each medal takes 10 hours to produce involving 22 stages of production.

Medals at London

The Olympic Summer Games in London features 302 medal events across 26 medal sports. The first medal awarded will be in Women’s 10m Air Rifle on Saturday, July 28, and the final medal to be awarded is expected to be in Women’s Modern Pentathlon on Sunday, August 12.

To see how the cost of this year’s Olympic Gold Medal has soared from those from the past two Olympics, visit our By the Numbers blog on CNBC.com.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Despite slowing economy, Fed is in no hurry to act

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The economy is growing more slowly than last quarter, but probably not enough to push the Federal Reserve into action next week.

US gross domestic product, the value of all goods and services produced, grew at a pace of 1.5% in the second quarter, down from a revised 2% in the first quarter.

Traders had been watching to see if the number, reported Friday, would signal a growth scenario that would encourage the Fed to be more aggressive at its two-day meeting next week.

“It’s not an emergency. I think they’ll be inclined to wait for September,” said Peter Fisher, head of BlackRock’s Fixed Income Portfolio Management Group.

Fisher said he expects the economy to have been growing at about 2% and, all told, that’s what the data and revisions show.

Fourth-quarter growth was revised from 3% to 4.1%, and the revisions show that 2011 was slightly better than thought. The first quarter was raised by 0.1%.

“There’s no news here,” Fisher said.

Barclays’ chief US economist Dean Maki said the 1.5% growth was just what he expected, and he sees a slight pickup to 2% in the third quarter. Consensus was for second-quarter growth of 1.4%.

“We think they’ll continue with what they’re doing, the Operation Twist, but not proceed with any further easing measures,” he said. “We believe the Fed is in data watching mode right now. Waiting to see whether GDP and job growth pick up in the third quarter or not. If they do, we think the Fed will simply proceed with the current Operation Twist and not launch any further easing measures.”

“However, if there’s not evidence of a pickup, we think the odds favor a further Fed action,” Maki said.

Many Fed watchers believe September is the earliest that the Fed would act, if it decides to embark on another round of quantitative easing, or QE.

A QE program this time would be expected to target mortgage securities, instead of Treasurys, as the Fed has purchased in the past two rounds of QE.

Operation Twist is different from QE, in that the Fed purchases Treasurys at the longer end of the curve, while selling the same amount of shorter duration Treasurys, without changing the size of its balance sheet in the process.

Traders say the idea of a QE3 has been providing some support to stocks, which along with commodities, have risen on past QE. But this time, corporate profits are showing strain and with ultra-low Treasury yields, some analysts question how effective another round of easing would be. Fed officials, themselves, have said the benefits of further easing would have to outweigh the costs.

Some Fed watchers expect the Fed next week to lengthen the time frame on its forecast for extreme low rates to mid-2015, from the end of 2014.

“I think it would be odd for the Fed to do that, to indicate they think things will be weaker for longer, but take no action,” said Maki.

The next key data for the Fed to ponder is the July employment report, expected next Friday. Maki expects to see growth of 100,000 jobs, up from the 80,000 added in June.

“We do think if we see that type of improvement in the next couple of reports that would be enough to keep the Fed on hold,” he said. “What would not be alright with the Fed is further deterioration over the next couple of months.”

© 2012 CNBC.com

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Wall Street legend Sandy Weill: Break up the big banks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Former Citigroup Chairman and CEO Sanford I. Weill, the man who invented the financial supermarket, called for the breakup of big banks in an interview on CNBC Wednesday.

“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that`s not going to risk the taxpayer dollars, that`s not too big to fail,” Weill told CNBC`s “Squawk Box.”

He added: “If they want to hedge what they`re doing with their investments, let them do it in a way that`s going to be mark-to-market so they`re never going to be hit.”

He essentially called for the return of the Glass-Steagall Act, which imposed banking reforms that split banks from other financial institutions such as insurance companies.

“I`m suggesting that they be broken up so that the taxpayer will never be at risk, the depositors won`t be at risk, the leverage of the banks will be something reasonable, and the investment banks can do trading, they`re not subject to a Volker rule (the Volcker rule explained), they can make some mistakes, but they`ll have everything that clears with each other every single night so they can be mark-to-market,” Weill said.

He said banks should be split off entirely from investment banks, and they should operate with a leverage ratio of 12 times to 15 times of what they have on their balance sheets. Banks should also be completely transparent, Weill said, with everything on balance sheet. “There should be no such thing as off balance sheet,” he said.

If banks hedge in any way, Weill added, positions should be mark-to-market (mark-to-market explained) and cleared through an exchange.

Weill said that by breaking up banks, they would be “much” more profitable.

“This is what all the regional banks do and everybody says buy regional banks,” he said. “They`ll just be bigger regional banks.”

Weill suggested that breaking up banks is the only way to rebuild the financial industry`s reputation in the wake of recent scandals and missteps.

“I want to see us be a leader, and what we`re doing now is not going to make us a leader,” he said.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Spanish bond yields where they should be: Mark Mobius

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Spain’s high government bond yields are right where they should be given the country`s inflation outlook, Mark Mobius, Executive Chairman at Templeton Asset Management`s Emerging Markets Group told CNBC on Wednesday.

Yields on benchmark 10-year Spanish government bonds jumped above the alarming 7.5% level this week on concerns that Spain may have to seek a financial bailout, rattling financial markets around the world.

Asked whether he remained confident about the outlook for Europe, Mobius replied that he was.

“I think these interest rates are what they should be,” he said, referring to Spanish yields.

“The rates in the US are artificially low…it’s not really a market rate and this is true in other parts of the world. Their rates are much too low so savings are being discouraged. So a 6-7% rate for a Spanish bond is what it should be because inflation is up at 4-5%,” he said.

On the issue of whether Spanish borrowing costs are unsustainable, Mobius said the big question is what Spain should do to tackle its debt crisis.

“Spain should cut spending. If you cut government spending, the economy will go up because there will be enough room for the private sector to thrive,” he said.

Mobius expects the European Union to “take three or four years” to resolve its debt issues but is optimistic that the bloc is moving in the right direction.

Still, he added that it could take some time for risk appetite to return to financial markets.

“There’s never going to be a turnaround in risk appetite under the current conditions. Why? Because volatility is increasing, global markets have become more and more volatile and they will continue to be and maybe increase the volatility.”

He said derivatives, high-frequency trading, hedge funds and lots of leverage all contributed to the possibility of increased volatility in the markets.

Mobius, who oversees USD 50 billion in assets, has seen 2% growth in net inflows of assets under management since the start of the year.

Upbeat on China

Mobius said he remained optimistic on China, forecasting yearly GDP growth of 7.5% or better for the world`s second largest economy.

This is in line with the Chinese government’s target of 7.5% growth this year.

Annual growth in China’s economy slowed to 7.6% in the second quarter of the year, its slackest pace in more than three years. The economy has cooled from double-digit growth rates seen in recent years.

“You can’t expect double-digit growth year after year because the base of the economy is so big, so we can expect high-single digit, maybe mid-single digit growth going forward,” Mobius said.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Jim Rogers hits out at Hendry, Edwards on China

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China’s economic resilience is under the spot light following a slowdown in growth rates in recent months. The big question facing investors in China and the global economy is can the world’s second biggest economy avoid a hard landing.

A rather interesting argument over the future of the Chinese economy has erupted following Jim Roger’s, the CEO of Rogers Holdings decision to call out two China bears in an interview with Investment Week.

Rogers dismissed fears over a hard landing and said both Hugh Hendry, who runs the Eclectica Absolute Return Fund and SocGen’s Albert Edwards are dead wrong to be so negative on the Chinese economy.

“Hugh has been dead wrong about China for three years now and China has not collapsed as he predicted, loudly, verbally and widely” said Rogers. Hendry used an interview with the Financial Times last week to predict bad things for investors and the global economy but has otherwise been keeping a low profile after betting on difficult times for China.

Rogers dismissed Edwards as being negative on everything, even Catholic saints.

“Albert has been bearish on everything for a long time. So if you are telling me he is bearish on China and bullish on everything else that would be different. But no, he is bearish on everything, including you, me and Mother Teresa” said Rogers in the interview with Investment Week.

Edwards is famous for his hugely bearish calls, seeing ultimate death crosses in the charts and calling other analysts “Happy Clappy”.

With Chinese stocks doing so badly the debate is likely to rage on but Rogers is buying as the stocks fall.

“The lower they go, the more interested I become.”

– By CNBC’s Patrick Allen.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

China manufacturing bounce doesn’t rule out stimulus

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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While a key private sector indicator shows Chinese factory activity picked up in July, experts tell CNBC economic conditions in the mainland still remain fragile and expect policymakers to provide further stimulus in the coming months.

The HSBC Flash Purchasing Managers Index (PMI) – the earliest available indicator of manufacturing activity in China – rose to five-month high of 49.5 in July from 48.2 in June, driven by an increase in the pace of manufacturing output.

A reading above 50 indicates expanding activity and one below 50 signals contraction.

“With a reading still under the critical 50 line, it is clear there remains much downside pressure in the Chinese economy,” Alistair Thornton, China Economist at Global Economics Group, told CNBC after the release of the data Tuesday.

“Manufacturing activity has contracted every month since October last year, painting a picture of stressed corporate profitability and a weak external climate. The economy has yet to turn,” Thornton added.

Hongbin Qu, Chief Economist, China and Co-Head of Asian Economic Research at HSBC, agrees that the slowdown in manufacturing activity has yet to be fully reversed, pointing to the employment sub-index, which fell to 47.4 in July – compared with 48.8 in June – its lowest level since March 2009.

“The job market is coming under increasing pressure….(and) the small improvement in new orders implies there is no meaningful turn around in domestic demand just yet,” he added. The new orders sub-index rose to 48.9 in July compared with 47.2 in June.

Qu says policymakers need to step up policy easing to support growth in the form of both monetary and fiscal stimulus.

Jian Chang, a Hong Kong-based economist at Barclays, says she expects China’s central bank to cut banks’ reserve requirement ratio (RRR) and interest rates this quarter as economic growth is unlikely to dramatically pick up after bottoming in the second quarter.

“The People’s Bank of China may not want to cut interest rates because of the inflation risk, but my feeling is that they may be forced to act because of the external situation and slowing exports,” Chang said.

She forecasts the central bank will cut the benchmark lending rate by 25 basis points by September, adding that a 50 basis point RRR cut could take place as early as this month.

Markets Feel Some Relief

PK Basu, Managing Director and Head of Asia Research and Economics at Maybank Kim Eng, who is more upbeat about the rise in the HSBC Flash PMI for July, says the data mark a “turnaround” in the Chinese economy.

“This is the strongest (reading) in five months. We’ve had two significant rate cuts and clearly the impact of the rate cuts is beginning to come through,” Basu said.

Relief over an improvement in the mainland manufacturing data sent some risk assets in Asia higher in the afternoon session, including the Australian dollar and cyclical markets such as South Korea’s KOSPI and Singapore’s STI Index.

By CNBC’s Ansuya Harjani

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Investors who stay in treasurys ‘will see a haircut’: Gross

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Investors looking to preserve their purchasing power will have to avoid Treasurys and put their money in “real assets” such as stocks and real estate, Bill Gross, Pimco co-founder, told CNBC’s “Closing Bell” on Monday.

“In the Treasury market all interest rates are on a negative basis,” Gross said. “Risk averse investors looking to hide in Treasurys will see a haircut relative to future inflation.”

So in order to maintain purchasing power, investors are being forced into riskier assets like stocks, high-yield bonds, real estate and gold, Gross said.

“It doesn’t mean you should buy them,” Gross added. “But if you want to maintain purchasing power you have to make the leap into real asset territory to get a real return.”

If Bernanke and other central banks can successfully reflate their economies, then “an investor wants real assets that can appreciate with that successful reflation,” Gross said. If they cannot, investors will continue to want high quality assets like Treasurys so they can maintain their principal, according to Gross.

Gross expects further Fed easing, but doesn’t expect anything at the August meeting. “Also what they do will be substantially diluted to what they’ve done in the past,” Gross said.

“With the 5-year Treasury at half a percent there’s little to do to lower rates. They might ultimately have to go to negative rates,” he said.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow