Bill Gross Answers The Liquidity Concerns He Raised In His Tweets

Bond King' and currently fund manager at Janus Capital Group Inc JNS for the Janus Global Unconstrained Bond Fund, Bill Gross, recently tweeted -

“Gross: (1 of 2) QEs worldwide supporting financial assets: ECB + BOJ each $1 trillion+”

“Gross: (2 of 2) U.S. Corp buybacks $1 trillion + as well; China too.  What happens when it stops?”

Gross was on CNBC recently to answer the question he raised himself in the tweets.

What Happens When Liquidity Isn’t There

“Well liquidity dries up and if we think that the liquidity is poor now, it will be even worse 2, 2, 4, 5 years from now when these manoeuvres typically stop,” Gross said. “You would think that a central banker wouldn’t stop if they knew that it would produce a crisis type of moment and lots of volatility, but central bankers don’t exactly know the way home and so we will just have to see.”

“But the global markets have benefitted to the extent of trillions of dollars of liquidity over the past few years and we have to wonder what happens when they don’t.”

Stocks May Head Lower

Gross was asked what happens when there is not any central bank left to start another round of quantitative easing (QE) and the current QEs come to an end. He replied, “Again theoretically they won’t stop unless they think that the economy has normalized. The problem being that the normalization may happen at a point in which inflation is not 1 percent, but 2 or 3 or 4 and therefore bund assets and stock prices might be heading lower.”