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Bill Gross: Romance Between China And The US Is Complicated

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Apparently they've been together for years? And say I love you though only because they have to? And are basically just fuck buddies but still apparently care enough to get upset and over-analyze the relationship to their friends? And sometimes China dresses up in leather and uses its 7 piece bondage kit on us?

China, meanwhile, calmly played its cards with a decades-long plan centered around capitalistic mercantilism, a game the United States claimed to play best but somehow forgot most of the rules. Even when holding the trump card of a reserve currency, mercantilistic domination depends on making something the rest of the world wants. We don’t and they do. The Chinese “object” has turned into an object lesson for developed economies that debt-financed consumerism is reaching an end. This affair then, which has sustained global growth during much of the 21st century, is vulnerable. Both parties still play kissy face and say “luv ya” (weak form for “I love you”) but there is tension there. China questions our credit quality and the yields on their trillion dollars of Treasury bonds. The U.S. questions their exchange rate and claims currency manipulation behind closed doors. This couple claims to still be dating, but “hooking up” may be more like it. Even then, no one stays the night, claiming they left their toothbrush at home.


And what of China and its fling as mercantile dominatrix? Here to stay – get used to it, PIMCO would say, but at the same time a substantial currency revaluation would assist its image and economy in its new role as the global economy’s economic locomotive. Consider investing, therefore, in non-dollar currencies that have strong trade ties with the Asian continent. Global equities? They’re cheap – dividend yields are higher than bonds in many cases – yet if growth falters there may be more downside to come.

A good relationship, as any adult knows, takes hard work and even then true love never runs smooth. We are into the “bumpy journey” phase of our New Normal where fear, lack of policy options and loss of control can dominate relationships. At a minimum, investors need to prepare for disharmony even with the hope of eventual reconciliation. Those old-fashioned love songs have become new-fangled freshly entangled ones from which an escape may be hard to envision.


New-Fangled Love Songs [PIMCO via BI]


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Has there ever been a person in your life you didn't realize how much meant to you 'til they were gone? Who you would have treated better if you'd known your final day with was your last? Who you would have begged to stay? Who you assumed would be back eventually but as the weeks, months, and years crept on forced you to come to the hard realization that the next and only time you'd see them would be in your dreams, because they were never coming back? Whose permanent absence, once finally accepted it, hit you like a ton of bricks? Then you know how people involved with Bill Gross's Mustache feel today. Once a daily presence on the PIMCO manager's face, the BGM went away for a while but it was assumed not for good because how could that be? Why would that be? It felt impossible. Then this happened: Bloomberg's Tom Keene: When does the mustache come back? Gross: Never. My wife has finally adjusted, so it's not coming back. If you never got to say a proper good-bye, if you would have done things differently, if you feel like the wind's been knocked out of you, if you can't bear the thought of being alone tonight, join us as we light a candle in memoriam. Bill Gross's mustache in deep contemplation Bill Gross's mustache in an insane asylum Bill Gross's mustache mustache so stoned it can't feel its face Bill Gross's angry mustache! Bill Gross's suicidal mustache Bill Gross's mustache undressing you with its mind ... Pimco's Gross on Financial Repression, ETF, Greece [Bloomberg]