This is an interview that was given in September 2012, but is just as relevant today. 

Bill Gross is co-Chief Investment Officer at PIMCO in the US.  PIMCO manages almost $2 Trillion.  It is the world’s largest bond manager and one of the world’s largest money managers.

When a precious metals fund manager says they like the outlook for gold and gold stocks, that isn’t a surprise.  When the world’s largest bond manager says that he is leaning toward gold over bonds … that is worth noting.

These are the main points I took from the interview: 

  • Gold is a currency that can’t be printed
  • Investors need to adjust their expectations
  • 10% returns aren’t likely to happen in most asset classes
  • Bill expects bond returns of 2%-3% over the next 10 years
  • He expects equity returns of 4%-5% - hopefully he is just being conservative
  • Other countries or specific industries should have better potential returns

This interview was aired shortly after Mario Draghi of the European Central Bank (ECB) introduced the Outright Monetary Transactions (OMT), an unlimited program to cut the borrowing costs of debt-burdened Eurozone members by buying their bonds.

The Fed in the US followed up with their QE3 announcement a week later.  Quantitative Easing (printing money) is a program that allows the Fed to buy US bonds to keep interest rates low and cut borrowing costs.

More recently, and subsequent to this interview, Japan elected Shinzo Abe in December.  He has also been very vocal about the need for unlimited QE in Japan to trigger inflation and lower the value of the Yen.

The problem with printing money is that every new dollar that is printed reduces the value of the money that is currently in your pocket.