Hi Timber, your call on rates could be right, however I don't think you can say that gold investors in the main called for immediate rate rises when QE is still in effect. Remember it hasn't even been curtailed yet & the Fed has still been injecting stimulus each month. I think most commentators who were hawkish on rates, called for a rate rise in the first half of 2015 perhaps Feb/Mar 2015 at the earliest. So I think your call that they are wrong may prove right but is a bit pre-mature. I think most were surprised at the rapidness of the reduction in QE as well.
If your call is right on rates that suggests to me that growth remains sluggish at best & then that goes back to our other conversations that if the Fed can keep rates lower for longer due to sluggish growth, then US equity indices at the current levels are very over valued.
Bill Gross I think had a flawed model & under certain situations was always going to come unstuck.
1) the fund was incredibly big, so inflexible & 2) it also had few options to diversify its portfolio.
Its like a gold fund just being a long only fund. If the commodity is out of favour then you have two options.
Sit in cash & wait, however investors don't pay you to sit on cash for long, or close the fund & return capital to investors.
There is a third alternative, the PIMCO & Paulson model & that's be stubborn or actually realize your ship is too big to turn without hitting an iceberg. Obviously the key here is to sell into strength rather than try & get out once the tide has turned. Easier said than done of course.
