'We are at such a moment of uncertainty': Bill Gross

Mon Nov 3, 2014 5:08pm EST
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By Jennifer Ablan

NEW YORK (Reuters) - Famed bond investor Bill Gross on Monday warned that deflation remained a growing possibility despite aggressive monetary policies by central banks around the world.

In his second investment outlook letter since joining Janus Capital Group Inc JNS.N, Gross said history showed that economies experience periods of inflation and deflation, and both "are the enemies of stability and growth."

"Prices change," Gross wrote in his November outlook, "and while they usually go up these days, sometimes they do not. We are at such a moment of uncertainty."

The roughly $7 trillion pumped into the financial system since the financial crisis by the world's three biggest central banks has succeeded mostly in lifting prices of securities rather than the cost of goods and workers' wages, he said.

"Prices go up, but not the right prices," Gross wrote.

Gross, who oversees the Janus Global Unconstrained Bond Fund, said Alibaba Group Holding Ltd (BABA.N: Quote) shares had soared from $68 to $92 in the first minute of their public debut, but other prices, including wages, "simply sit there for years on end.

"One economy (the financial one) thrives, while the other economy (the real one) withers," he said.

Gross, whose letters to investors are as famous for their quirky asides and analogies as for their economic and market analysis, called himself a "philosophical nomad disguised in Western clothing" in his latest investment outlook.   Continued...

Bill Gross speaks at the Morningstar Investment Conference in Chicago, Illinois, June 19, 2014. REUTERS/Jim Young