Bill Gross Gets One Right

http://www.futureofcapitalism.com/2010/03/bill-gross-gets-one-right

Pimco fund manager Bill Gross has taken a lot of criticism around here, but he finally makes some sense in his April 2010 market commentary:

should it concern an investor in 30-year Treasuries that the Congressional Budget Office estimates that the present value of unfunded future social insurance expenditures (Social Security and Medicare primarily) was $46 trillion as of 2009, a sum four times its current outstanding debt? Of course it should, and that may be a primary reason why 30-year bonds yield 4.6% whereas 2-year debt with the same guarantee yields less than 1%.

The trend promises to get worse, not better. The imminent passage of health care reform represents a continuing litany of entitlement legislation that will add, not subtract, to future deficits and unfunded liabilities. No investment vigilante worth their salt or outrageous annual bonus would dare argue that current legislation is a deficit reducer as asserted by Democrats and in fact the Congressional Budget Office. Common sense alone would suggest that extending health care benefits to 30 million people will cost a lot of money and that it is being "paid for" in the current bill with standard smoke, and all too familiar mirrors that have characterized such entitlement legislation for decades.

Remember, this is a guy who tells the Guardian, "When I go home, I don't watch Fox and I vote for Obama." It kind of makes one wonder why.

by Ira Stoll  |  Mar 29, 2010 at 10:54 am Related Topics:  Bill Gross, Health Care, President Obama, Press receive the latest by email: subscribe to the free futureofcapitalism.com mailing list