With the Federal Reserve's bond-buying program artificially pushing up stock and bond prices, Pimco's Bill Gross told CNBC's "Street Signs", investors can get the best returns in emerging markets.
"All asset prices have been elevated to some extent artificially by what the Fed and other central banks have done," Gross told CNBC on Wednesday. "They've lowered interest rates to near zero percent levels. That raises asset prices. Ultimately, at some point we have to pay a piper."
Gross doesn't expect this "irrational" pricing to end right away. In his monthly investment letter, Gross wrote, "On a scale of 1-10 measuring asset price 'irrationality,' we are probably at a 6 and moving in an upward direction."
But Gross isn't advocate that investors sell. "Pimco's… 'rational temperance,' in contrast to excessive historical bouts of 'irrational exuberance,' simply counsels to lower return expectations, not to abandon ship," Gross wrote.
Gross told CNBC investors should be prepared for returns of below 10 percent.
Investors looking for the highest returns with the least amount of risk may want to consider emerging markets like Mexico and Brazil, Gross said, adding that Mexico's economy is growing 4 percent and interest rates are 5.5 percent to 6 percent.
"You can find countries with good balance sheets, decent fiscal situations in terms of low deficits and yet still high growth rates," Gross said. "I would advise an investor looking for something close to 10 percent to move offshore as opposed to in the United States."