Gross, keynote speaker at the Morningstar Inc. annual investor conference, said the Federal Reserve’s policies have left investors with little option but to turn to Brazil, Canada, Mexico, and Germany — where interest rates are higher and potential returns are greater.
He acknowledged the increased risk, which many investors fear, but said the risk may be worth a return that’s better than the current bond market in the United States.
He told the advisers to steer their clients to dividend-paying stocks, such as Procter and Gamble and Johnson & Johnson, as another option.
Investors who are putting money away for college or retirement and are seeking returns of 8 to 10 percent are not going to get that over the next decade — possibly even longer, he said. They can’t park money in money market funds; they now yield near zero interest.
At least the dividend-paying companies may consistently offer 3 to 5 percent a year, he said.
Gross has made it clear he’s no fan of the government debt and economic policies intended to artificially keep interest rates low in an effort to stimulate the economy.
He said interest rates pushed lower by government intervention rob savers and investors, particularly those who seek the safety of government Treasury bills and bonds.
“Financial repression takes money out of the pockets of savers and investors and puts it in the hands of debtors, the US Treasury being one,’’ he said. “Companies and households with too much debt become the favored ones.’’
Although Gross encouraged investors to look abroad, he acknowledged that no one should have an entire portfolio in developing markets or emerging markets, because there’s too much risk.
While he believes there will not be a third round of quantitative easing — the policy in which the Federal Reserve buys US Treasurys to keep interest rates low — he said the government will try to keep rates down for years.
He invited the conference organizers to bring him back in 15 years; he said “with 51 percent certainty’’ that it will then be apparent investors were financially repressed for the entire period of time.
David Pitt writes for the Associated Press.
