Pimco's Gross says US policies could lead to disruptive markets

BOSTON, Nov 1 (Reuters) - William Gross, co-chief investment officer of America's biggest bond mutual fund, said recent U.S. policies are not generating the kind of growth needed to kick-start the economy and may usher in ``disruptive financial markets'' in the future.

In a four-page letter posted on his Pacific Investment Management Co.'s website, Gross said the Federal Reserve's quantitative easing policies have fizzled.

``Financial repression and quantitative easing were supposed to be the extraordinary monetary policies that kick-started the real economy in the other direction. They have not,'' Gross wrote in the letter.

And if growth does not pick up soon, Gross said, he sees a ``growing risk that the negative consequences of misguided monetary and fiscal policy might lead to disruptive financial markets at some future point.''

The letter was titled ``Time to Vote,'' but he did not endorse either candidate in next week's presidential election.

Gross, who coined the phrase ``New Normal,'' for a prolonged period of slow growth, also warned investors that the days of strong returns are likely gone.

``We are in a 'New Normal' world,'' Gross said, adding that this means Treasury yields should stay low and that money market funds will continue to pay hardly anything at all.

``The 'cult of equity - or better yet the cult of 'total return' - for both bonds and stocks - is over, if that definition presumes a resumption of historical patterns anywhere close to double digits,'' Gross said.