Pimco's Gross: Washington Dysfunction a 'Permanent Disease'

Friday, 18 Oct 2013 08:26 AM

By Dan Weil

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Despite Congress' agreement on a budget and debt ceiling increase Wednesday, investors should expect more trouble out of the nation's capital going forward, says Pimco Co-chief Investment Officer Bill Gross.

Congress funded the government only until Jan. 15 and raised the debt ceiling only until Feb. 7.

"Dysfunction in Washington appears to be a permanent disease that ultimately should concern longer-term Treasury investors as to the volatility of Washington's debt," Gross told CNBC.

Editor’s Note:
Obama Donor Banned This Message (Shocking)

Given the damage that the government shutdown wrought, Gross doesn't expect the Federal Reserve to taper quantitative easing at its policy meeting Oct. 29 and 30.

"It seems to us that because the economy has been subtracted in terms of GDP by perhaps 0.2-0.3 percentage point in this quarter, the Fed is going to take a look-see perhaps at their next meeting and not taper again," he said.

Meanwhile, the run-up in Treasury bill yields amid fears of a government debt default gave Gross a buying opportunity in recent days. The gains were small — thousands of dollars — but "something an active manager should do," he maintained.

Other experts agree with Gross that the shutdown will curb economic growth this quarter.

"The insanity in Washington is affecting consumer and business confidence. That's the huge restraint to growth," Joel Naroff, chief economist at Naroff Economic Advisors, told Reuters.

A survey the news service conducted of 70 economists Oct. 11 to Oct. 16 predicted a 2.3 percent growth rate for the fourth quarter, down from a 2.5 percent forecast in September.

Editor’s Note: Obama Donor Banned This Message (Shocking)

Related Stories:

Budget Deal Provides Relief but Little Long-Term Benefit to Economy

S&P: Shutdown Has Cost Economy $24 Billion, Cut US Growth

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