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Here's how Bill Gross is playing post-Fed market

Bill Gross
Tim Boyle | Bloomberg | Getty Images
Bill Gross

Pimco's Bill Gross sees an increasingly constrained investing environment, where the unwinding of central bank stimulus is creating an "unstable field" of choices.

In his most recent letter to investors, the managing director of the Newport Beach, Calif. bond giant—$1.97 trillion under management—combines a baseball metaphor with the observations of economist Hyman Minsky to demonstrate just how skewed things have become.

He urges investors to follow the Fed's lead on the near-end of the yield curve, and to beware of inflation.

Minsky, he observes, would have approved of using the $3.7 trillion Fed balance sheet and deficit spending to goose the post-financial crisis moribund economy.

How far that's gone, though, might have produced a different reaction:

(Read more: What everyone gets wrong about monetary policy

What perhaps Minsky couldn't conceive of was the point at which debt, deficits and interest rates would go to such extremes that the creation of credit itself, which was and remains the heart of capitalism, would be threatened. No longer might the seventh inning stretch lead to a Coke, some "Cracker Jacks" and the resumption of the old ballgame. Instead, zero-bound interest rates and debt/GDP ratios in a majority of capitalistic economies would begin to threaten, not heal, the nature of finance and investment in the real economy.

The resulting fallout hasn't been pretty as investors contemplate a less potent central bank:

In short, and in too-abbreviated summation, debt-laden economies with near-zero-bound interest rates became victims of their own excess, a condition that was more difficult to stabilize cyclically because Big Government and Big Bank had reached limits, and private market investors with huge portfolios of their own began to leave the ballpark early. Why stick around if your team is down by seven runs with only a few innings left? Why invest in financial or real assets if bond prices could only go down, and/or stock prices could no longer be pumped up via the artificial steroids of QE?

The Fed is widely expected to shift its efforts from $85 billion worth of bond buying known as quantitative easing, coupled with a near-zero policy interest rate, to "forward guidance," or verbal dictates that look into the future for where the Fed will push rates.

Investors, then, are left to simply play the central bank game.

Gross urges investors to begin guarding against the inflation likely to come with the unwinding of QE by buying Treasury Inflation Protected Securities, or TIPS.

(Read more: Here's a 'TIP': Timeto get ready for inflation)

Other than that, he said fixed income should be focused at the front end of the curve, which is where the Fed will be concentrating its efforts.

For those of you who are still fans of the old American pastime – in this case capitalism and the making of money as opposed to baseball – how do you play on this rather unstable field of our own making? Which pitch do you swing at? Well, commonsensically, in an unstable global economy that is increasingly difficult to stabilize, an investor should seek out the most stable of assets.

Stocks, he said, "might be at risk" as the S&P 500 already has catapulted nearly 150 percent since the 2009 lows.

Indeed, the analysis from Gross points up the hazards of a post-QE world, where the Fed has gone where none of its predecessors dared to tread.

Improving economic data is forcing the Fed to pull back the stimulus on which the bond and equity markets have depended, and investors must now try to anticipate what wreckage will be left behind, and what opportunity lies ahead.

(Read more: Upbeat Fed outlook suggests QE tapering is near)

For his own tastes, Gross wants Pete Rose in the Hall of Fame, and for investors to prepare to hit a curveball.

Baseball's old saw pleads to "buy me some peanuts and Cracker Jack, I don't care if I never get back." Jack or Jacks aside, getting back to the old normal Minsky world of stabilization via Big Government and Big Bank is now being challenged, as are the investment choices and future returns dependent on them. Grab for the prize at Jack's bottom if you will, but the safer and perhaps most rewarding treat lies at the top with those front-end yields and inflation-protected securities based on our evolving age of central bank "forward guidance." I have a hunch that even Pete Rose would bet on this one.

(Get the full letter here.)

By CNBC's Jeff Cox. Follow him @JeffCoxCNBCcom on Twitter.

Wall Street