Bill Gross throws cold water on ‘buy the dip’ mantra
Bill Gross’s long-time Wall Street experience means that he’s seen many market pops and drops, including the Nifty 50, skyrocketing inflation in the 1970s, the S&L crisis in the late 80s and early 90s, the Internet boom and bust, the Great Recession, Covid, and the 2002 bear market.
In short, Gross has been around the block, making his take on markets this week particularly worrisome.
“Investors should not try to ‘catch a falling knife,” wrote Gross bluntly in an email to Bloomberg.
Buying the dip in the S&P 500 has been a winning strategy historically, but the pain endured while stocks find their bottom can be hard to withstand. And it can take years to recover losses. The situation is worse for individual stocks, which may never get back to their previous highs (case in point: Cisco Systems (CSCO) still trades below its 1999 peak).
"This is an epic economic and market event similar to 1971 and the end of the gold standard except with immediate negative consequences,” said Gross.
Interesting. The Apple Card is a strange beast - it’s designed to encourage online only txns, especially Apple Pay ones. This isn’t inherently a bad thing as they are more secure than “normal” cc txns to begin with, but also because Apple eliminated almost every fee and roadblock most cards have as well, making it very pro-consumer.
It’s also the first card I’m aware of that came out and said “your spouse should get one too to start having some equality in credit scores”, something my spouse promptly took advantage of.
Then lastly Apple has a high-interest savings account you can tie to cashback as well, also fee-free.
As a result of all of this, our Apple Card is often the go-to card, and I had started to wonder if Apple and Goldman-Sachs may be regretting the card given how low-margin I would imagine it is for them. But this article seems to suggest otherwise. For whatever reason there’s a bidding war to underwrite it!
Well, in his first term, multiple times he caused a problem, then stopped doing it and declared he made things better. Him removing them after 3 months isn’t unlikely.
However, that doesn’t mean prices will go down. Before Bush Jr, gas was 99 cents in my area. It climbed to $5 under him and now we are all happy when it’s around $3. Yes, US has cheap gas compared to the world, but it’s not the 99 cents or less it was for decades before.
Prices in a market exhibit hysteresis - a resistance to return to form. In some markets, it isn’t just resistance, it’s outright refusal, that we call “ratcheting.” Once the price goes up, it will NOT go down. This is most common in systems that require extensive contracting and approval procedures to set pricing.Once that process has been followed, no one is going to go through it to lower the price. This affects markets like healthcare, automotive, defense, aerospace, and others.
The only real hope to avoid this would be for Congressional Republicans to move fast and take back Congressional power to set tariffs and undo T****’s handiwork. It won’t completely undo the damage, but it could stop the bleeding.
To be fair, the cost went up due to Katrina, and then the oil companies did not want to let go of all the profits… I remember driving home from class the day after the hurricane hit, and watching gas stations literally raising prices as I drove past…
Yeah, that’s the main thing. Remember everyone was complaining about the costs, blaming everyone except the companies reporting record-setting profits.
Need a little bit of that government control here.
That’s because there are multiple ways that credit card companies make money on these cards. If this card is your go-to card, then even if you’re not borrowing anything, your spend is still generating fees for the issuing bank and the network (Visa, Mastercard, etc) every time it is used, because of interchange fees. I’m pretty sure that apple’s proposition is that by integrating the card and the phone into users lives to a great extent, their cards will be used by customers for nearly everything, allowing the bank that issues the apple cards, to gain interchange on a lot of spending.
However, from this article, it looks like the cost of the features that make the card attractive (cashback, instant issuance and availability to most iphone users) were miscalculated by Golman Sachs.
I’m especially surprised that any bank would allow its commercial partner to interfere in the credit issuance process- and the “instant approval” doesn’t seem to allow time for fraud checks to be carried out… It looks like GS overestimated their ability to handle this stuff, when other , more experienced card issuers baulked at the deal.
Follow up on that point- There doesn’t seem to be a bidding war to take over from GS- The article doesn’t make it very clear, but the bidding war is between Visa and Mastercard as to which network the transactions will go through. For them, the more transactions that go through their network, the better. They don’t take on any credit risk, they just provide the payment infrastructure to allow the transaction to go through.
What apple need is an issuing bank to replace GS, and I don’t think there are any takers with the current deal on offer from apple.
Indeed! There is a direct connection between the deregulation since Reagan and their ability to pull down record profits… and much of the public STILL blames the government for that, but not for the right thing - they don’t blame them for years of deregulation, but for prices going up…
Kushner was drawn into the campaign, and the administration, by degrees—“drafted into this crazy journey,” he has been heard to say. More than anything it’s a reflection of how few people there were to do anything in the campaign’s early days. At one point during the campaign, when Trump wanted to speak more substantively about China, he gave Kushner a summary of his views and then asked him to do some research. Kushner simply went on Amazon, where he was struck by the title of one book, Death by China , co-authored by Peter Navarro. He cold-called Navarro, a well-known trade-deficit hawk, who agreed to join the team as an economic adviser. (When he joined, Navarro was in fact the campaign’s only economic adviser.)
