It’s unclear how far subprime debt woes will spread, but the fallout is likely to hit Main Street harder than Wall Street, Pimco Founder Bill Gross told CNBC.
“That’s where the defaults, delinquencies (and) sub-primes ultimately rest,” Gross said Tuesday. “To the extend that they affect consumption and investment in housing going forward, then that’s where the damage is. It’s not necessarily in Bear Stearns.”
Bear Stearns High-Grade Structured Credit Strategies Enhances Leverage Fund has been hit hard, underscoring the risk of investing in risky bonds with borrowed money.
Gross said he didn’t foresee a crisis, but noted that rates on high quality loans and bonds are rising.
“No one knows how far this thing can go,” Gross said. “It sort of feeds on itself in terms of loans, currencies and anything that provided an attractive carry, or return, over the past several years."