- Latest warnings echo DoubleLine’s Gundlach and Oaktree’s Marks
- Janus manager: Lack of global growth driving ‘Ponzi finance’
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.”
The things that look good to buy are what central bankers haven’t been purchasing, Gross said Wednesday in an interview on Bloomberg Television.
“Central banks have not bought a lot of gold,” he said. “They have not bought real estate to this point.”
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.
Investments Gross recommended in the TV interviews include closed-end Build America Funds and SABMiller Plc, which is being acquired by Anheuser-Busch InBev SA. He also cited LinkedIn Corp. as an example of a safe stock, because it’s being acquired by Microsoft Corp. for more than the current share price.
Gross’s unconstrained fund returned 3.9 percent this year through Aug. 2, outperforming 68 percent of its Bloomberg peers. Its largest investments as of June 30 included shares of SABMiller, bonds from Ally Financial Inc. and Ford Motor Credit Co. and the sovereign debt of Mexico and Argentina. The fund, with roughly half of its money coming from Gross’s personal fortune, has earned 3 percent since he took over in October 2014 after leaving Pacific Investment Management Co.
Gross also oversees the $334 million Old Mutual Total Return USD Bond Fund, an Ireland-based fund that was up about 6.7 percent this year after fees, compared with a 4.3 percent gain for the Pimco Total Return Fund, which he ran for decades and built into the world’s largest mutual fund at one time.
The 72-year-old manager has been reiterating cautious views as markets rally.
“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.”