Bond guru Bill Gross is wondering how investors will fare if the current economic recovery gets derailed.
"All of us, even the old guys like Buffett, Soros, Fuss, yeah -- me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch that an investor could experience," Gross, the founder and co-chief investment officer of Pimco, wrote in his monthly investor letter.
"What if a future epoch favors ... continual bouts of 2008 Lehmanesque volatility, or encompasses a period of global geopolitical confrontation with a quest for scarcer and scarcer resources such as oil, water or simply food?" asks Gross.
Throughout 2013, Gross's existential musings have taken a decidedly dark turn.
As far back as December, Gross was already outlining long-term challenges facing investors operating in the so-called New Normal, a phrase made famous by Pimco CEO Mohamed El-Erian in the wake of the financial crisis that is characterized by sluggish economic growth.
In his April letter, Gross, who runs Pimco's Total Return Fund (PTTRX), wonders whether the epoch of expanding credit that started in the early 1970s could be coming to an end.
He writes that the truly great investors will be those that can change course, or at least learn a few new tricks if "capitalistic expansion" slows or if "quantitative easing policies eventually collapse instead of elevate asset prices."
"Ah, now, that would be a test of greatness: the ability to adapt to a new epoch," Gross writes.
Gross' point and a perhaps a high pitched warning to investors: He's carefully watching for a sharp, potentially scary turn of events.
In keeping with his penchant for pop music themes, he makes this point using lyrics from Michael Jackson's Man in the Mirror. "If there's a different one coming though, to make our and your world a better place, we might need to look in the mirror and make a Chaaaaaaaange..."
Gross has used artists including Flavor Flav, the Beatles, the Dire Straits and Oasis to illustrate some of the dangers bubbling up in the financial system. The bond guru rarely mentions Internet stocks, but it's tempting to imagine a catchy Bill Gross-themed Pandora (P) station.
Gross ends his April missive promising to keep investors informed if he does see a shift. He says he'll keep looking in that mirror.
Get used to lower returns on stocks and bonds, Pimco's founder and co-chief investment officer Bill Gross told investors in his monthly letter.
Gross, who oversees Pimco's Total Return Fund (PTTRX), said that investors are entering a period of what he calls "rational temperance." By that Gross means that investors should expect gains from stocks, and corporate and high-yield bonds to be more muted.
Corporate credit and high yield bonds are somewhat MOREMaureen Farrell - Feb 27, 2013 11:54 AM ET
Bond guru and Pimco (PTTRX) managing director Bill Gross isn't buying into the bull market. In fact, he's warning investors to be afraid, be very afraid, of how inflation and the flood of cheap money will affect all investments.
Investors should be prepared to accept "lower returns on bonds, stocks, real estate and derivative strategies," Gross wrote in his monthly letter entitled "Credit Supernova!"
Championing something of a bunker mentality, Gross MOREMaureen Farrell - Jan 31, 2013 11:38 AM ET
Everything comes at a cost, including the Fed's low rate policy and multiple rounds of monetary easing.
Not one to pass up a good musical reference, noted bond guru and Pimco managing director Bill Gross' latest missive is aptly titled "Money for Nothin' Writing checks for free" in a nod to Dire Straits. In the past, Gross has cited The Beatles and Flavor Flav in pieces.
In his first investment outlook MORECatherine Tymkiw - Jan 3, 2013 1:46 PM ET
The fiscal cliff may be the biggest short-term threat for the market, but there are even scarier problems to worry about, according to Pimco chief investment strategist Bill Gross.
In his latest letter to investors, posted online Tuesday, Gross outlines the long-term challenges facing the U.S economy and lists his "picks and pans" for investors operating in the so-called New Normal.
The New Normal, a term made famous by Pimco CEO Mohamed MOREBen Rooney - Dec 4, 2012 12:25 PM ET
What do Federal Reserve chairman Ben Bernanke and Flavor Flav have in common?
Yet, the 90s-era hype-man turned reality TV star, or at least his signature over-sized clock medallion, makes an unlikely appearance in Bill Gross's latest musings on Fed policy.
In a Thursday letter to investors, the Pimco founder conjures up a Genie "with a 10-inch diameter Flavor Flav clock hanging ceremoniously around his neck," complete with sunglasses and MOREBen Rooney - Nov 1, 2012 11:49 AM ET
The Bond King came out swinging against the most recent easing plans out of the Federal Reserve and European Central Banks on Twitter late Monday.
Gross: Central banks are where bad bonds go to die. Sell bad bonds, buy good ones. Investing sometimes can be very simple.— (@PIMCO) September 17, 2012
The comments from Bill Gross, founder of investing firm Pimco, come just days after the Fed unveiled its plan MOREHibah Yousuf - Sep 18, 2012 1:53 PM ET
Bond king Bill Gross says it's time for individual investors to get used to a new (and slower) dance.
In his monthly investment outlook letter, the founder of Pimco and manager of the world's largest bond fund, Pimco Total Return Fund (PTTRX), wrote that the age of credit expansion that led to double-digit portfolio returns is over, and the age of inflation has begun.
And that means investment returns from both stocks and MOREHibah Yousuf - Sep 5, 2012 2:07 PM ET
The world's largest bond investor took to Twitter Monday to air his gripes about Paul Ryan, the newly chosen Republican vice presidential candidate.
GROSS: Do bond markets take heart from Ryan selection? Not me. He talks lower deficits but really believes in lower taxes — exact opposite.— (@PIMCO) August 13, 2012
The comments from Bill Gross, founder of investing firm Pimco, show the challenges that Ryan may face when trying to MOREHibah Yousuf - Aug 13, 2012 3:58 PM ET
Not a member yet?Sign up now for a free account
|Stocks finish higher for fourth straight week|
|Oil-price manipulation: the next Libor?|
|Prison exclusive: Bernie Madoff can't sleep|
|Google says you'll know when Glass is sketchy|
|Signs of new housing bubble in several areas|