some pretty flowery prose from the usually stodgy Gross:
pimco.com
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We are stardust
We are golden
We are billion-year-old carbon
And we've got to get ourselves
Back to the garden
---Woodstock: Crosby, Stills and Nash
[....]
Still this realization, while fascinating, leaves me as frozen as a molecule of H2O in a Sub-Zero unless one takes the additional leap from the cold hard scientific fact to the metaphysical. Seems that Crosby, Stills & Nash did as well: in their song's next line they proclaim that “we've got to get ourselves…back to the Garr arr arr arr deeeeen.” (they stretched out the “Garden” part dear reader in case you forget the song). My first thought when contemplating these words at 60 was one of sheer envy. How did they figure it out in their 20s and I'm heading into my fourth score of years and just now getting a clue? But I digress. What was it about the mythological Garden of Eden that they wanted to get back to and what does it have to do with stardust? Well, as American author and teacher Joseph Campbell points out, the Garden was a place of oneness, of unity, of no divisions in the nature of people or things. And as Bryson elaborates, we're all made from the same atoms – Beethoven's, Shakespeare's, Alpha Centauri's: stardust. Understanding that scientific fact can at least point us in the direction of the Garden. By finding it again, perhaps we would experience a oneness with nature and things, and just as importantly, a oneness with each other. How dare we behead hostage after hostage in Iraq. How dare we kill ourselves in Jerusalem and Gaza with the Garden so tantalizingly nearby. How dare we suffer Somalia and Sudan with hundreds of thousands of us dead from tribal genocide. How dare we _______________ (fill in your own). We are all stardust, we are all golden, and we've got to get ourselves back to the “Garr arr arr arr deeeeen.”
[....]
Because of these realities based on historically high levels of debt issued during a period of superficially low interest rates, the global economy is indeed in my view, more vulnerable than it has been for the past 25-30 years. The economic and investment consequences appear to be as follows: real short-term rates kept too low will create asset bubbles and accelerating inflation. Real yields raised too high will pop existing asset bubbles and lead to economic recession. The “Goldilocks” yield is the only one that speaks to relative stability, and the margin for error is much narrower than in prior decades. If bond investors are accepting of this thesis, they must acknowledge the uncertainty of their own portfolio structures. Accelerating inflation speaks to defensive durations and a healthy dose of TIPS. But potential recession at some point speaks to extended durations and a reemphasis on deflationary preventative interest rate policies similar to the past 24 months. While Greenspan “speak” points towards gradual and measured hikes to return to a more neutral interest rate policy, he as well as other global central bank chieftains must acknowledge that “neutral” in a levered global economy is a yield shrouded by fog and fraught with uncertainty. The “Garr arr arr arr deeeeen” of “financial and interest rate” Eden is out there somewhere but getting back to it may be almost as difficult as the return to our mythological one filled with oneness, unity, and love for one another. |
