Pimco's Bill Gross Tells Barron's Spending Cuts Will Curb Worldwide Growth

Bill Gross, who runs the world’s biggest mutual fund at Pacific Investment Management Co., said investors should expect less growth globally as companies and governments cut spending, Barron’s reported.

“We see similar gains of 4 percent to 5 percent this year in stocks, high-yield bonds, commercial real estate and other risk assets,” Gross said in a “Roundtable” interview with money managers in the June 14 edition. “There is no asset that glistens, promising double-digit returns.”

Gross said he likes “high-quality” sovereign bonds in the U.S. and Germany, which represent decent value and assure investors they’ll be paid. He also likes GMAC SmartNotes, which yield about 8 percent to 9 percent for 2-year to 10-year notes, he said.

Abby Joseph Cohen, senior investment strategist for Goldman Sachs Group Inc., likes U.S. Steel Corp., Barron’s said. She cited U.S. automotive and industrial-equipment demand for steel.

She also said Pfizer Inc. isn’t getting enough credit for its product pipeline, including a new drug called tanezumab that may become an “important” arthritis drug.

Investor Marc Faber expects U.S. markets to end “moderately” lower for the year as economic data and corporate profits disappoint in the second half, Barron’s said.

S&P 500 Seen Lower

He forecasts the Standard & Poor’s 500 may drop to about 950, as U.S. economic growth could slow and China may slow as well, Barron’s said. He recommended shorting the Australian dollar to take advantage of a slowdown in China’s economy, which would crimp industrial commodity demand, Barron’s said.

Scott Black, president of Delphi Management Inc., recommended America’s Car-Mart Inc., which may benefit from slowing U.S. economic growth as the auto retailer sells to customers who don’t have credit.

He also likes Novellus Systems Inc., which should benefit from continued U.S. and Asian demand for computers and semiconductors.

Mario Gabelli, chief executive officer of Gamco Investors Inc., cautioned investors about a potential economic slowdown in China, the end of monetary stimulus by the Federal Reserve, the debt crisis in Europe and fiscal policy from President Barack Obama, Barron’s said.

Gabelli favors Sara Lee Corp. because it will gain from its single-serve coffee business, which is growing about 20 percent annually, Barron’s said. Following a sale of some assets in Europe, the company will have about $500 million of cash and no debt, the weekly newspaper said.

Las Vegas Sands Corp. is another Gabelli recommendation, as he says the company is expected to generate as much as $1 billion in earnings before interest, taxes, depreciation and amortization during the next 12 months from its new Singapore casino, Barron’s reported.

To contact the writer on the story: Dan Hart in Washington at dahart@bloomberg.net.

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