bloomberg.com / By Liz Capo McCormick / Jan 31, 2013 9:14 PM GMT+0800
Bill Gross, manager of the world’s biggest bond fund, said investors are increasingly at risk as global financial markets run out of energy and time.
“The countdown begins when investable assets pose too much risk for too little return,” Gross wrote in his monthly investment outlook posted on Newport Beach, California-based Pacific Investment Management Co.’s website today.
The record monetary stimulus of the Federal Reserve, triggering near-zero interest rates, has crippled savers and prior business models that were based on a positive real return, he said. Real growth of the economy has suffered in the process as net interest margins at banks fall, insurance companies struggle to make returns and pension funds are increasingly underfunded.
Investors should position for eventual inflation as the “end stage of a supernova credit explosion” is likely to produce more inflation than growth by holding Treasury Inflation Protected Securities, Gross wrote. “Get used to slower real growth; QE and zero-based interest rates have negative consequences. Move money to currencies and asset markets in countries with less debt and less hyperbolic credit systems” such as Australia, Brazil, Mexico and Canada.