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September 05, 2012 at 09:03 AM
In typical Bill Gross style, the head of the world’s largest bond shop employs the Lindy dance craze, former Citigroup CEO Chuck Prince, the Wimpy cartoon character and his dying cult of equity argument in a mash-up of prose to describe the “age of inflation that is upon us,” which he claims typically “provides a headwind, not a tailwind, to securities prices in both stocks and bonds.”
In his monthly outlook for September he begins, as usual, with a bit of history.
“Credit, of course, is what makes the global economy go …Wimpy said it best, ‘I’ll gladly pay you Tuesday for a hamburger today,’” Gross writes. “So McDonald’s grew from a million to 500 billion served and Wimpy and his wimpalikes were delighted in the exchange, although their arteries and midsections inevitably came out a loser … But in order to promote and indeed foster continuing symbiosis, both borrower and lender need to operate in a nutrient-rich environment, a “credit” petri dish of sorts which fosters strong bones and healthy lenders and borrowers in their adult years. That unfortunately does not seem to be the case.
Wimpy’s weight-challenged midsection, he continues, is an “obvious testament to the overleveraged condition of today’s global borrowers. Too much debt leads to forced diets and de-levering, a process which has been ongoing since Lehman 2008. Borrowers are just not in a healthy place and if history is our guide, their restoration may be almost biblical in terms of timing: seven years of fat followed by seven years of lean—perhaps even longer.”
