The Time to Buy Continues to be Now

More evidence about deflation from PIMCO’s Bill Gross, who runs the world’s largest bond fund, who said he is buying longer term Treasuries to protect against deflation. From a Bloomberg report “There has been significant flattening on the long end of the curve,” Gross said in an interview from Newport Beach, California, with Bloomberg Radio. “This reflects the re- emergence of deflationary fears. The U.S. is at the center of de-levering as opposed to accelerating growth.”

Officials at Pimco forecast a “new normal” in the global economy that will include increased government regulation, lower demand and slower growth. According to Gross, the economy will likely grow at a 2 percent to 3 percent rate going forward.

What really causes inflation are wages, credit and rents, and all three are declining at the same time. Because of the deflation and the widespread excess capacity, both in the labor market and the product market, the only way that corporate profits are rebounding is through aggressive cost-cutting. At the end of the day, aggressive buyers are taking advantage of the slack demand and slow economy.