Bill Gross Expects Fed To Lower Rates To A Three Handle

I just watched Erin Burnett interview Bill Gross, the bond king at PIMPCO Bonds. I expect within hours, you will be able to view the interview via video from Pimco's homepage. Gross expects the Fed to lower rates to 1% real and about 3% nominal to save the housing market and the consumer. Or as Gross stated, he expected the Fed to lower to a three handle. While he does not predict a recession, he does predict a few years of slow growth in the U.S.

I keep wondering if there is a severe disconnect between stock investors and credit and bond investors. Stock investors seem complacent about current events and optimistic about the longer term. Everything goes in cycles, the economy is healthy, and the future is bright. Credit and bond investors seem worried about current events. Unless corrective measures are taken, the housing problem will severely affect the broader economy. And the Fed finds itself painted into a corner. If the Fed does as Gross expects, the U.S. dollar will fall further and commodities will continue to rise.

As regular readers know, I am bullish on commodities.