Americans Can’t Retire When Bill Gross Sees Repression

[Purveyor]

By Jeff Kearns, Steve Matthews and Katherine Peralta Mar 25, 2014 9:42 AM ET
Twelve years after retiring as a telephone repairman, Roger Wood clocks 12 to 15 hours a week at a Lowe’s Cos. hardware store near Glen Allen, Virginia.

“About the same amount I made 30 years ago,” Wood, 69, says of his $12 hourly wage. “I’m worried about my portfolio because of low interest rates, even to the point of considering full-time again.”

Feeble returns on the safest investments such as bank deposits and fixed-income securities represent a “financial repression” transferring money from savers to borrowers, says Bill Gross, manager of the world’s biggest bond fund. Workers 65 and older, struggling with years of depressed yields, are the only group of Americans who are increasingly employed or looking for jobs, according to Labor Department participation-rate data.

“We’re going to be financially repressed for decades,” Gross, the 69-year-old billionaire co-founder of Pacific Investment Management Co., told Bloomberg Radio Feb. 7, citing Federal Reserve interest-rate policy that aims to cut borrowing costs. “I hate to be gloomy, but, yes, for the next 10 years, the oldsters, and I’m in that camp, are going to be disappointed in terms of the policy rate.”

more...

http://www.bloomberg.com/news/2014-03-25/can-americans-retire-in-a-decade-of-financial-repression-.html

[whatthehey]

1. This is a damned if you do scenario

Low interest rates help home buyers (best multiplier effect), car buyers and other borrowers whose spending drives demand and thus employment.

But they hurt conservative investors/savers.

Personally I'm beefing up savings returns by judicious addition of blue chip dividend stocks like AT&T, Duke, GE. Even some high-return less stable stocks which have high dividends and the cashflow to keep them up like MCC and CTL. The "principal" may fluctuate in value, but for those reliant on yield income this is more than compensated for by far greater returns than deposits or CDs. My dividend stocks reliably pay out an aggregate 7% annually, when precious few banks break 1% on less than jumbo deposits and even long term jumbo CDs don't get much past 2% very often. People who are sensitive to balance more than return might want to be cautious, but by definition if you primarily live off yield, you are generally not dipping too far into your balance very often.