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PIMCO’s Bill Gross: The World’s Biggest Investor Talks
By Dr. Steve Sjuggerud, President, Investment U
Tuesday, October 14, 2003: Issue #281
‘The stocks, bonds and currency of a debtor nation [the U.S.] in the process of reflating are not attractive investments.’ – Bill Gross
Bill Gross manages more investor money than anyone on the planet. For good reason he has an extraordinary track record across three decades, with very few losing years. And today his PIMCO Total Return Fund is the nation’s largest bond fund.
I find it interesting that Bill Gross, known as The Bond Man, hates U.S. bonds right now, according to his latest Investment Outlook. Gross also doesn’t care for stocks. So what does the biggest fund manager in the world actually like right now in terms of investments – and why? Let’s find out
How the Boom Won’t End
‘If this were a game of Clue,’ Gross says, ‘and we were wondering whether the killer was:
- Professor Plum
- with a lead pipe
- in the library,
‘You can be very confident that it won’t be
- Chairman Greenspan
- with an interest rate hike
- at the Federal Reserve.’
Bill Gross believes that Greenspan basically won’t raise rates for a while. If and when rates go up, Gross says, ‘The housing market as well as almost all of our finance-based [companies] would be affected [negatively].’
This is no small deal It’s amazing just how much of U.S. corporate profits are based on financing. Sears, as Gross points out, was really a credit card lender with a retail store. GM sells cars, but almost all its second-quarter profits came from its mortgage business. Deere sells tractors, but makes a pile of money from its financing and GE The list goes on.
Bill Gross is obviously bearish on stocks and bonds. In addition to what I cited, he’s worried about the mountain of debt America is piling up, and he’s worried about the potential rise in interest rates in Asian countries (who now hold a large portion of American debts).
What Bill Gross Recommends
Gross is playing defense. He says, ‘Inflation and currency protection will be paramount.’
To play defense against inflation, you put your money into:
- gold, in some form
- and inflation-protected investments
You can buy inflation-protected savings bonds from the government (www.savingsbonds.gov) or you can invest in gold (we’ve covered a variety of ways to invest in gold in previous IU E-letters).
For currency protection, you can diversify some of your safe money outside of the U.S. dollar. An easy way for Americans to do this is through the foreign-currency CDs at www.everbank.com. While I would recommend them anyway, please note that my publisher has a commercial relationship with Everbank and may receive compensation if you open an account.
Good investing,
Steve
Today’s Investment U Cribsheet
- For more information on specific ways you can invest in gold, check out these two recent IU E-Letters: #272 – Sizing Up the Real Value of Gold Coins; and #261 – A Rational Reason to Buy Gold. To learn more about Bill Gross, you can read my other issues: Bill Gross on Investing in Bonds, Issue # 338 and Where We’re Headed, Issue # 222 or log onto www.pimco.com.
- What to Do When Interest Rates Rise
- Treasury TIPS Coming Back into Fashion
- Senior Secured Floating Rate Bonds: The Best Investments to Own When Interest Rates Rise
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