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CNBC EXCERPTS: CNBC’S LARRY KUDLOW SPEAKS WITH BILL GROSS, PIMCO FOUNDER AND CO-CIO, TONIGHT ON CNBC

When: Tonight, Tuesday, August 30, 2011

Where: CNBC’s “The Kudlow Report

Following are excerpts from the unofficial transcript of a CNBC interview with Bill Gross, PIMCO founder and co-CIO, tonight on “The Kudlow Report” (M-F, 7-9pm ET).

All references must be sourced to CNBC.

Bill Gross Backtracks on Treasurys: http://video.cnbc.com/gallery/?video=3000042843

GROSS ON OWNING MORE BONDS

WHAT I SAID WAS THAT SOMETHING THAT I THINK ALL BOND MANAGERS WOULD SAY IF THEY WERE HONEST. THEY WOULD SAY WISH I'D OWNED MORE TREASURIES. TO SAY OTHERWISE WOULD BE TO SAY SOMETHING YOU WISH YOU'D BET ON THE MIAMI HEAT INSTEAD OF THE DALLAS MAVERICKS. IT'S OBVIOUS WHO WON, RIGHT?

GROSS ON FREE MARKET CAPITALISM

FREE MARKET CAPITALISM, IN OTHER WORDS, WORKING FOR CHINA AND BRAZIL, BUT IT'S NOT WORKING FOR AMERICA OR EURO LAND

GROSS ON STRUCTURAL IMPEDIMENTS

THERE ARE STRUCTURAL IMPEDIMENTS TO THE U.S. ECONOMY TO DEVELOP MARKET ECONOMIES THAT WILL PREVENT GROWTH IN THE 3% TO 4% CATEGORY. LET ME ASK YOU, IN TERMS OF CONSUMERISM IN TERMS OF THE U.S. CONSUMER. IF THE UNEMPLOYMENT STAYS AT 9% PLUS AND IF WAGE GAINS ARE NON-EXISTENT, THEN WHERE IS THE SPENDING POWER COMING FROM?

GROSS ON CORPORATE BONDS

(Kudlow asked Gross what he is buying now)

GROSS: WELL, CORPORATE BONDS OF THE HIGHEST QUALITY, YES.AND THAT WOULD BE A AND AA TYPES OF CORPORATE, NOT HIGH-YIELDBONDS BECAUSE THEY DON'T DO WELL, YOU KNOW, IF WE NEAR THE RECESSIONARY LEVEL OF 0%.IN TERMS OF FOREIGN BONDS, LETME JUST CITE THE COMPARISON.A FIVE-YEAR TREASURY IN THEUNITED STATES AT 1% ACTUALLY ALITTLE BIT LESS IN CANADA, 1.7%,IN EURO LAND, 2.1%, AND MEXICO, 5.4%, AND BRAZIL, 11%.AND THESE ARE COUNTRIES, BY THE WAY, LARRY, WHICH HAVE WHAT WE CALL CLEANER DIRTY SHIRTS.MEXICO HAS HALF THE DEBT OF THE UNITED STATES, BRAZIL HAS HALF THE DEBT OF THE UNITED STATES AND HAS TREASURY RESERVES AS OPPOSED TO DEFICITS.AND SO THESE ARE COUNTRIES WITH HIGHER YIELDS AND BETTER BALANCE SHEETS.

GROSS ON CORPORATE TAX REFORM

GROSS: WHAT I WOULD SAY IN TERMS OF CORPORATE TAX REFORM IS YES, LET'S REFORM TAXES, LET'S REFORM COPORATE TAXES, AND LETS REFORM INDIVIDUAL TAXES. BUT AT THE SAME TOKEN, LETS NOT LOWER THEM BECAUSE CORPORATE TAXES ARE 10% OF TOTAL FEDERAL REVENUES, THEYRE AT AN ALL TIME LOW LARRY AND TO SUGGEST THAT CORPORATIONS ARE THE POOR BABY IN THIS PARTICULAR STORY IS JUST ABUSURDITY.

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