Legendary bond investor Bill Gross recently took some time out to talk to SmartMoney magazine staff for their piece on the “world’s greatest investors.” The following excerpt appeared on the SmartMoney website this morning:

We meet Gross in a Chicago hotel room prior to his giving a speech. The billionaire has just finished ironing his own shirt; he fears the suite’s lack of a minibar might represent “the new normal” in a world where consumers and investors will have to make do with less. Gross has been deeply involved in the government’s efforts to revive the economy. But while he acknowledges the need for the new financial regulations the White House recently proposed, snail-like growth will be the price of that safety net. “The next four to 12 years will not be investor-friendly,” he says. The new cosmic order involves 8 percent unemployment, anemic single-digit annual stock market increases, and ultimately, once the short-term economic crisis is over, higher inflation.

Granted, the master of bonds can seem excessively gloomy about stocks. After the tech bubble collapsed, Gross predicted the Dow would sink to 5000. “I’m still waiting for that,” says Daniel Moisand, former president of the Financial Planning Association. But Gross sees a major role for stocks in a slower economy. Investors should seek stable income from stocks that pay good dividends like Coca-Cola and Procter & Gamble. He also recommends a bond portfolio focusing on high-rated companies like Dow Chemical or AT&T.

After that, it’s time to hunker down. “Give up the notion that the Dow is going to 14000,” says Gross, or “that the house is going to catch up in value to what you paid for it.” The world has changed, he says, because we consumed too much and saved too little.

SmartMoney staff pointed out a few investments that the founder and co-chief investment officer of PIMCO likes. From the article:

Short-term bonds of Dow Chemical and AT&T.

To boost his portfolio’s income, Gross is focusing on high-quality corporate bonds with interest rates of 7 to 8 percent.

Treasury Inflation- Protected Securities (TIPS).

With the government facing deficits for the foreseeable future, investors will need an inflation hedge.

Source:

“What the World’s Greatest Investors Are Saying Now: An Overview”
SmartMoney, July 14, 2009

This post is filed under Bill Gross, Blue Chips, Bonds, Stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.