March 2, 2015 / 8:25 PM / 4 years ago

UPDATE 1-Janus' Bill Gross warns on dangers of low interest rates

(Adds Gross comments on Nasdaq)

NEW YORK, March 2 (Reuters) - Bond investor Bill Gross on Monday criticized ultra-low interest rates, saying they could harm global growth instead of boosting it in the way that many central banks intend.

“Low interest rates globally destroy financial business models that are critical to the functioning of modern day economies,” Gross, who oversees the Janus Global Unconstrained Bond Fund, wrote in his monthly investment outlook.

“Negative/zero bound interest rates may exacerbate, instead of stimulate, low growth rates ... by raising savings and deferring consumption,” he wrote.

He said pensions funds and insurance companies were particularly “threatened by low to negative interest rates.”

Central banks around the world, particularly in developed markets, have slashed interest rates in recent years to boost sluggish growth.

The U.S. Federal Reserve took rates to near zero during the financial crisis, and yields on bonds have remained historically low for years. The yield on the 10-year Treasury note is currently 2.0855 percent.

The Fed has been considering raising its benchmark interest rate for the first time since 2006, a decision that has been complicated by weak economic performance globally and subdued price pressures in the United States.

Gross suggested that the Fed could move to raise rates as soon as the second quarter, starting with gradual increases.

He advised investors to “stay conservative in your investment portfolio. Own high-quality bonds and low P/E (price to earnings), high-quality stocks if you want to stay out of the doghouse.”

Gross on Monday warned of excessive prices of some technology stocks, after the tech-heavy Nasdaq composite index crossed the 5,000 milestone for the first time in 15 years.

“Some of the tech stocks that are up 10 or 15 percent today I think are reflective of a little bit of a bubble. Not the same bubble as in 2008 or 2000, but certainly an overvaluation that might at some point be corrected,” he told cable television network CNBC.

He said he was not “so sure” that Apple Inc was overvalued, however.

Known as the “Bond King” for his decades-long run of successful returns, Gross shocked fixed-income markets last year when he quit bond giant Pacific Investment Management Co (Pimco) on Sept. 26 for rival Janus.

Gross helped launch Pimco more than four decades ago and built it into a $2 trillion investment powerhouse. But lackluster returns more recently, outflows and grumbling about his leadership style and personality dented his reputation. (Reporting by Luciana Lopez; Additional reporting by Sam Forgione; Editing by Bernadette Baum)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below