Hedge funds could regain the $2.7 trillion that had been gained prior to economic crash
The Pimco fund manager Bill Gross is the face of the modern investor. His dubious fame came from being able to steer his $158 billion fund away from debt issued by governments such as the US, UK, Greece and almost all European nations. Asian markets are his preference because of the willingness of the inhabitants to work hard for low wages as well as almost guaranteed growth for the fund.
In a newsletter written by Gross this March, he told investors to ignore what English governor Mervyn King had to say about the rise of the UK economy. He believes that investors should be shown the money before they invest and that they should never trust a government. He is sure to be seen as a great evil when the next crash inevitably comes but hurling insults at bond fund managers is utterly pointless when you consider the scale of the global economy.
No, those who should be vilified include BT engineers, Californian civil servants and German manufacturers for promising themselves comfort in retirement. Low paid workers in final-salary schemes are looking for an unrealistic retirement fund which they could only achieve through luck on the stock market. Along with huge sovereign wealth funds bloated by oil such as the $750 billion UAE fund, these investors are looking for the best possible returns and are prepared to gamble to achieve them.
The UK stock market now tells us at a glance that international companies and investors meet to speculate on UK and Russian mining firm commodity prices as much as they do on the future of retailers and insurers. As investors move around the world, bubbles start to form. There were fears of a commodities bubble, the bonds one is about to burst with property making a comeback. In the early 1990s, property prices took 6 years to recover after that recession and a decade to fully recover their losses. The current property recession has only lasted 18 months within the worst economic crisis in 60 years.
The Californian civil servant is at fault because they have an asset, a fixed retirement payment promise and fund managers whose goal is to find them the best investments to make up for any shortfalls in the pension scheme. Even if they don’t know what they are doing, their actions are helping the likes of Gross to ignore government’s debt and find easy pickings somewhere else. They have agreed to fund managers informing employers that they must freeze pay and cut what they contribute to younger worker’s pensions. They pretend to adhere to corporate governance while asking for extra dividends and a growth in asset price so they can retire early.
These are the people who have saved most of the trillions of dollars accrued in the last 30 years and have great power. They own property, stocks and have lent money to the huge assortment of governments, companies and banks who had their hands out. With so much money lost by these savers, it is unsurprising that they want it back.
Politicians view these people as downtrodden souls who are a positive good for the economy. Yet we see that Greece is growing bankrupt and Gross has some of their money. Why is he so powerful? The answer is because selfish, avaricious western investors have instructed their fund managers to grasp every penny they can on their behalf so that they can live in luxury when they retire.