According to Bill Gross, the bond manager from Janus Capital, the Federal Reserve communication with the market is confusing. Minutes from June meeting released yesterday showed that policymakers decided to hold interest rates for some time until they had a handle on the implications of the Brexit vote.
Interestingly, minutes also showed that several bankers expressed concerns about the committee’s communications and whether it was being fully effective in informing the public. Gross agreed with that statement.
He said that investors become confused when the look at the green dots as high as they are and a hear from others that suggest reliance on old standard models. He added that what Fed really wants to do is keep the interest rate low and perhaps keep curve as positive as possible, because 10-year rates and 30-year rates at these levels are not conducive for economic health for many financial institutions like banks and insurance companies.
At the end of his interview, he said that when money is so overpriced, when interest rates so low and negative, when stock are artificially high, then it is time to worry about the return of your money as opposed to the return on your money.
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