Money manager Bill Gross says investors should favor gold and real estate while avoiding most stocks and bonds trading at inflated prices.
“I don’t like bonds; I don’t like most stocks; I don’t like private equity,” Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund, wrote in his monthly investment outlook Wednesday. “Real assets such as land, gold and tangible plant and equipment at a discount are favored asset categories.”
The views echo concerns expressed by managers including TCW Group’s Tad Rivelle and Oaktree Capital Group LLC’s Howard Marks as stocks reached record highs and bond yields plunged to historic lows amid sluggish economic growth. “Sell everything,” DoubleLine Capital’s Jeffrey Gundlach told Reuters last week. “Nothing looks good here.”
“Central banks have not bought a lot of gold,” he said. “They have not bought real estate to this point.”
Build America
Infrastructure spending and other types of fiscal stimulus may be coming into favor as central banks run out of tools, Gross told CNBC on Wednesday. An example is Japan’s introduction last week of payments to low-income citizens, a type of helicopter money, he said. The U.S. Congress, even if it’s still controlled by Republicans, is less likely to oppose infrastructure spending.
“I think we’re headed in that direction, not just in the U.S. but on a global basis,” Gross said.
The 72-year-old manager has been reiterating cautious views as markets rally.
‘Too Little’
“Sovereign bond yields at record lows aren’t worth the risk and are therefore not top of my shopping list right now; it’s too risky,” Gross said in a statement released Tuesday by Old Mutual Global Investors. “Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price.”
In his August outlook for Janus Capital Group Inc., Gross said the financial system won’t break down immediately. The time will come “when investable assets pose too much risk for too little return.”
Low interest rates already hurt returns for banks, insurance companies, pension funds and individual savers, according to Gross. Central banks haven’t figured out an end game for their efforts to stimulate economies by buying sovereign debt and other investments that are failing to prove effective.
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“Central bank ‘promises’ of eventually selling the debt back into the private market are just that — promises/promises that can never be kept,” he wrote.
Nominal growth, according to the fund manager, needs to reach 4 percent to 5 percent in the U.S., 3 percent to 4 percent in Europe and 2 percent to 3 percent in Japan before the global economy “devolves into Ponzi finance, and at some point implodes.”