Bill Gross manages the largest mutual fund in the world at PIMCO, which today announced via Twitter, " Even with QE3, Treasury yields have practical limits. 1.50% 10 year is a good common sense bottom." In translation, the Federal Reserve and Ben Bernanke can't save the economy.
Bond Market Forecast or PIMCO's Hidden Agenda?
Your humble mutual funds guide has been telling you for quite some time how bond funds work in relation to rising interest rates: Prices move in opposite direction as yields (aka interest rates). Therefore, when the best-known bond fund manager in the world says Treasury yields are at a "bottom," the educated investor knows Bill Gross is saying that bond prices have reached a peak (and the only way to go from here is down).
With that said, I wouldn't go out and sell all your bond mutual funds and stick your money in cash or some alternative fixed income investment. I also wouldn't interpret PIMCO's message as truth. In fact, Bill Gross was wrong in 2011 when he started shifting around his holdings in anticipation of rising interest rates. Because of this faulty forecast, he and many other fund managers lost to index funds in 2012.
I imagine PIMCO's recent increase in Twitter messages and what appears to be an orchestrated PR campaign is simple marketing 101: They know the future for bond mutual funds may not be quite as good as in the past but they don't want to lose their bond fund assets either. Although Bill Gross admits that bonds may not do too well in the long-run, he's also downplaying stocks. If you read between the lines, Gross is saying, "Hey, I know I'm a fool to say now is the time to give me your money to manage but I'm a smart guy and stocks don't look too good either. Therefore, you may as well keep your money with me."