Tags: Wilbur Ross | taper | Janet Yellen | Federal Reserve

Wilbur Ross Expects No 'Precipitous Move' to Taper Under Yellen

By    |   Monday, 25 Nov 2013 11:57 AM

The Federal Reserve won't move quickly to taper quantitative easing (QE) under its chair-to-be Janet Yellen, says legendary investor Wilbur Ross, chairman of WL Ross.

"I think Janet Yellen is relatively unlikely to do any kind of a precipitous move in easing [tapering] quantitative easing," Ross told CNBC.

"It wasn't too many months ago when she voiced an opinion that perhaps we needed more quantitative easing rather than less. So I believe if she does anything near-term, it'll be very gradual."

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The pace of tapering might be as slow as $5 billion a month, which would eliminate quantitative easing over a "very gradual 17-month period," Ross said. "I think pre-announcing such a gradual glide course would probably — by increasing certainty —  offset the concern about the reduction in QE."

The Fed is currently buying $85 billion of Treasurys and mortgage-backed securities a month. A survey of economists by Bloomberg earlier this month found a median forecast of March as the start date for tapering.

Yellen signaled in congressional testimony earlier this month that until she and her colleagues at the Fed see evidence of sustained economic growth and buoyant job creation the central bank's extremely accommodative policy will continue.

"I consider it imperative that we do what we can to promote a very strong recovery," Yellen told the panel, Reuters reported.

Meanwhile, Ross, a noted art collector, says froth is brewing in that market. "I do think things are getting a little bit extreme," he said.

And what's causing the rush into expensive artworks? Investors are "running away from paper money," he said. "When you think about it, if someone is really wealthy and has a lot of cash, what are the alternatives?"

Investors are shying away from short-term bonds because yields are almost zero, Ross says. And they realize that long-term bonds may plunge when QE ends, he maintains.

"So where do you go?" Ross said. "I think a lot of people are putting it into art. And that's being compounded by the fact that certain countries are spending literally billions of dollars developing what will be true world class museums. And so they're driving up the prices enormously," he said.

Ross says he himself is a buyer. "I guess I've been sucked in by the fad," he said. "We collect Chinese contemporary and western surrealist paintings, and we've been doing that for quite a while."

He's not buying out of fear that the dollar will fall. "[It's] just that we very love surrealism," Ross said. "And I think if you're investing in distressed companies [his specialty], what could be a more appropriate form of art than surrealism?"

Earlier this month a triptych painting work by Francis Bacon sold for $142 million, raising talk of a bubble.

"There are going to be bubbles in certain artists," Philip Hoffman, chief executive of the Fine Art Fund Group, an investment and advisory firm, told CNN Money. "But the market itself has exploded."

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The Federal Reserve won't move quickly to taper quantitative easing (QE) under its chair-to-be Janet Yellen, says legendary investor Wilbur Ross, chairman of WL Ross.
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2013-57-25
Monday, 25 Nov 2013 11:57 AM
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