Say this for the bond king: he truly believed that the U.S. had a terrible debt problem. The bad news is that we don't. I mean that's not bad news for us, but it's bad news for Gross. Having the courage of your convictions can be costly when your wrong. So he was very wrong about an approaching bear market in Treasuries because of "mountains of debt."
"Gross a few months ago owned up to his firm's mistake in 2011 of directing investors away from Treasurys. Despite the heavy $15 trillion debt load and $1.3 trillion budget deficit, investors have continued to snap up U.S. notes and bonds as a safe haven against the turmoil from Greece, Italy and other peripheral eurozone nations."
Right now the narrative Gross is telling seems closer to reality. He is warning that in the near future a 5 percent return on investment is nothing to sneeze at any more-bonds or stocks. His $1.35 trillion fund is up only 2 percent this year. He put his money where his mouth was but was wrong. The gains were from other invesments.
Now he says, "Investors should recognize that Euroland's problems are global and secular in nature, reflecting worldwide delevering and growth dynamics that began in 2008," he wrote. "It will be years before Euroland, the United States, Japan and developed nations in total can constructively escape from their straightjacket of high debt and low growth."
"he advocates finding the "cleanest dirty shirts" in which to invest. Among them are the U.S., Canada, United Kingdom and Australia. He also advocates finding higher-quality corporate bonds in 2012 as economic growth slows."
He's right too that the U.S., Canada, the UK and Australia are better-of course due to the fact that they are not in the Euro. That's pretty much the division right now that counts. It's not about deficits or even debt but rather whether you have the power of the printing press or have abdicated that vital power to the inflation phobic EU.