Pimco's Gross: US Is ‘Best of the Worst’ Global Investments

Thursday, 28 Jun 2012

Bill Gross, the world's biggest bond fund manager at Pimco, said the United States is the least bad choice in a poor global investment environment, but this could change if Washington doesn't get control of the nation's fiscal situation.

"Timing in investment markets is critical and at the moment, the U.S. is considered to be the cleanest. That's why Pimco owns them. But things change," 68-year-old bond guru wrote in his latest investment outlook on Thursday.

Gross, co-founder of Pacific Investment Management Co., noted in his July letter that over time, "a good name can be slandered," alluding to what he sees as a possibility for the U.S. if it doesn't get its fiscal house in order.
He said that in an environment with "negative real rates on Treasurys," the quest by pensions to generate a 7 percent return on investment was elusive and possibly not achievable for years.

He cautioned investors against chasing securities and investments that seem to offer better returns, especially debt from countries less financially stable than the United States.

"Sovereign nations as well cannot all be counted on to guarantee a return of principal, let alone a return on investment that comes anywhere close to matching 7 percent in nominal terms."

Still, while the U.S. represents the best investment choice of a bad lot, that may not last forever, Gross said.

"This debt crisis should be considered global as opposed to regional, and investors should recognize that clean dirty shirts are not forever thus."

Gross reiterated his opinion about the U.S. as the "cleanest dirty shirt" in a CNBC interview on Thursday, saying it could be "several years at least" when the U.S. fully confronts its debt problems.

Gross said the European Union summit beginning Thursday in Brussels will not alleviate the eurozone's debt problems.

The summit is "another giant kick-the-can because of the disagreements between Germany and the peripheral countries," Gross said, adding, "those that are expecting big things out of this EU summit, we think, are bound to be disappointed."