Gross has been betting that Treasuries will trade within a certain range, capped by deflationary forces, such as debt, demographics or commodities, and supported on the lower side by central banks and money creation, he said. He’s recommended this strategy before, and now he’s widening the outer bounds of his targeted range. Additionally, he recommends buying a chunk of volatility within that range.

“The execution, like we saw with the China trade and the bund trade, is the critical component, and when you buy those straddles obviously you’ve got to know when to take them off too,” he said. “It gets tricky. And there’s no doubt the market is very illiquid.’’

China, Germany

Gross recommended shorting the Shenzhen Composite Index in June, right before it plunged, but he didn’t directly do the trade. Instead he put on Standard & Poor’s 500 Index shorts and other indirect bets.

In April, he recommended the “short of a lifetime” against the German bund; he later said his forecast was “well-timed but not necessarily well-executed,” as he’d bet on a trading range and volatility pushed prices outside of those levels.

Now, Gross said, stocks may rally despite his read of the market.

"That’s not to say that stock markets don’t defy logic -- they do," he said. "But I wouldn’t be on that train, put it that way. ”

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