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Bill Gross' latest advice to investors is not comforting, with the fixed income guru down on all the conventional choices.
"I don't like bonds; I don't like most stocks; I don't like private equity," the Janus Capital portfolio manager said Wednesday in his latest letter to investors.
The reason Gross is so down on the two conventional asset classes is that central banks have created an atmosphere where economic growth and the high-yielding returns that should accompany it are difficult to find.
There's "too much risk for too little return" for banks to lend in the current climate, while the low-interest atmosphere helps asset prices but crimps savings and business investment.
"Banks, insurance companies, pension funds and Mom and Pop on Main Street are stripped of their ability to pay for future debts and retirement benefits," Gross wrote. "Central banks seem oblivious to this dark side of low interest rates. If maintained for too long, the real economy itself is affected as expected income fails to materialize and investment spending stagnates."
His dour outlook comes as central banks around the world continue to provide stimulus and keep rates anchored well below normal levels. In the U.S., the Federal Reserve has kept its key rate in the 0.25 percent to 0.5 percent rage, even though Fed officials had indicated last December that rates were likely to rise four times this year.
Gross has been a critic of central bank policies, saying they have stymied growth even while pushing investors toward financial risk-taking.
So where does he think people should invest? Well, that's also difficult.
"Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories," he said. "But those are hard for an individual to buy because wealth has been 'financialized.'"
His doubts about equities and fixed income aside, both classes have performed admirably this year. The S&P 500 is up 5.5 percent, while both government and corporate bonds have turned in gains. The Vanguard Total Bond Market exchange-traded fund, which tracks investment-grade corporate bonds, has gained 4.2 percent, while the iShares 20+ Year Treasury Bond ETF, which tracks long-duration government issues, has returned a gaudy 14.7 percent.
Gross runs the $1.5 billion Janus Global Unconstrained Bond fund, which, as its name implies, can invest in a wide range of assets. Cash and equivalents currently make up the greatest portion of the fund — 46.5 percent — while corporate bonds also have a considerable share, according to Morningstar.
The fund is up 3.93 percent year to date, ahead of the typical fund in the category. Gross gives the fund a plug, saying "much of my money is there."