Former Newport Beach, Calif. PIMO [Pacific Investment Management Company] co-CEO Bill Gross predicts an end of the so-called bull market “supercycle,” believing the Federal Reserve Board will hike interest rates.  Once the “bond king” managing the world’s biggest bond fund with assets over $2 trillion 2013, Gross left PIMO for Janus Capital Sept. 26, 2014, following his co-CEO Mohamad El-Erian joining PIMCO’s parent company, multinational financial powerhouse Allianz as Chief Economic Advisor.  Since Gross and El-Erian left daily operations of PIMCO, the bond fund lost about $700 billion in total assets under management.  Gross now warns that the Federal Reserve Board and other central banks created so much debt that it’s bound to kill the current bull market.  Now adopting a bearish approach, Gross agrees with El-Erian for investors to largely go into cash.

            Watching Yellen end Oct. 29, 2014 the third round of the Fed’s quantitative easing or $85 billion in monthly treasury purchases, Gross sees credit drying up, ending the bull market in bonds and stocks. “Credit based oxygen is running out,” said Gross, warning investors to shift into cash.  El-Erian admitted April 7 that he’s mostly in cash expecting a major stock market correction.  Writing for Janus “A Sense of an Ending,” Gross compared the market to his own mortality at 71-year-of-age.  Worth of $2.3 billion, Gross actually has little financial worry other that protecting his principle from a stock market collapse.  Gross and El-Erian know that Yellen has the controls to keep the pedal-to-the metal when it comes to Wall Street.  House Financial Services Committee Chair Rep. Jeb Hensarling (R-Texas) and Senate Banking Committee Chair Sen. Richard Shelby (R-Ala.) both worry about U.S. debt.

            Sharing concerns about the over $1.8 trillion U.S. national debt, Gross and El-Erian think it will force Yellen to start hiking interest rates.  Like Japan since the 1980s, the U.S. economy since the 2007-08 financial collapse, shows the same deflationary cycle preventing the central bank from raising interest rates.  With the latest 2015 Q1 GDP report at .25%, Yellen’s hands are tied for the foreseeable future about raising rates.  “The secular 30-year-bull market in bonds likely ended April 29, 2013,” Gross said on Twitter, making the same prediction as today.  What’s different today is an economic cycle with relatively low unemployment at $5.3% that doesn’t add significantly to the nation’s GDP.  What changed from past economic recoveries is less reliance on government jobs, with the unemployment rate calculated with an abundance of part-time and low paying private sector jobs.

            Getting little traction on GDP despite the drop in the unemployment rate prevents Yellen from hiking rates without triggering what Gross and El-Erian fear a bear market.  “Stanley Druckenmiller, George Soros, Ray Dalio, Jeremy Grantham and others agree with Gross and El-Erian that the current bull market can’t last for ever. Yellen’s refusal to raise rates stems from the near flat-line on GDP growth.  Neither Gross nor El-Erian have answers for what must be done to stimulate GDP growth.  With Yellen controlling monetary policy, the Congress can act on fiscal policy, either raising or lowering tax rates.  Despite adding nearly 10 million private sector jobs since March 2010, government tax receipts remain anemic because the GOP-controlled Congress continues to reduce government jobs.  As the 2016 presidential rate heats up, the debate on the economy turns on government jobs.

            Gross and El-Erian’s predictions don’t take into account the Fed and European Central Bank continuing quantitative easing or low interest rates for the foreseeable future.  When the European Union went into recession Oct. 29, 2014, the ECB decided to mimic the Fed, starting its own round of bond buying Jan. 22. Yellen hoped when she ended QE3 Oct. 29, 2014, U.S. economic growth would spur a possible rate increase in June 2015.  When the Q1 GDP showed only .25%, she knew that her plan of raising rates was off.  Fund traders like Gross and El-Erian miscalculated the sluggish U.S. growth, believing Yellen’s overly optimistic forecasts. “I merely have a sense of an ending a secular bull market ending with a whimper, not a bang.  But if so, like death, only the time is in doubt,” Gross, proves, if nothing else, that his crystal ball is no different than anyone else.

            Despite all the bearish sentiment from a growing number of Wall Street players, the investment community has yet to face today’s reality:  The economy has flat-lined, teetering on recession.  GOP presidential candidates have bagged on Obama for his lack of economic progress. By most metrics, especially the ones published by the Fed, the economy and Wall Street has done much better under Obama.  Among the GOP’s best hopes for 2016, including former Florida Gov. Jeb Bush, Sen. Ted Cruise (R-Texas), Sen. Rand Paul (R-Ky.), Sen. Marco Rubio (R-Fl.) Gov. Scott Walker (R-Wis.), etc., they haven’t come to grips with the need for more government jobs.  With all low-paying and part-time private sector jobs, it’s not enough to boost GDP out of today’s sluggish growth. Investors like Gross and El-Erian forget that there’s more to the economy than just buying or shorting stocks and bonds.

`John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.