Washington Post: Bill Gross of Pimco

By Jennifer Rubin

 

Bill Gross, founder and co-chief investment officer of Pimco, the world’s largest mutual fund, made news last month when he dumped all U.S. Treasurys from the $1 trillion fund he operates. I spoke with him by phone yesterday afternoon. He had a solemn warning: The United States has a year or two to change course or face a debt crisis akin to what Greece, Portugal and Ireland have experienced.

He describes bond traders as “vigilant but not vigilantees,” meaning they are cautious and on the outlook for signs that inflation (“the enemy of bonds”) will rear its head. He explained that he got out of Treasurys because the return was too small relative to the huge risk on the horizon. Moreover, the Federal Reserve, he says, has masked the problem because “the right hand is buying from the left,” referring to the Fed’s controversial move in November to engage in huge buying of U.S. debt (“quantitative easing”)...

He doesn’t think much of the Fed’s inflation model, which doesn’t account for increasing demand for commodities from emerging countries. He thinks it is “definitely possible” we will have some form of stagflation, “3 percent or 2 percent or 4 percent inflation and low growth.”...

He warns, “It behooves Republicans and Democrats to begin to set an agenda for changing the direction of the country.” As for Rep. Paul Ryan’s plan he’s most enamored of the Medicaid reform. He says if we go to a block grant system “then there is hope” to get entitlements under control....


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http://www.washingtonpost.com/blogs/right-turn/post/exclusive-interview-bill-gross-of-pimco/2011/03/29/AFI5qXuC_blog.html