Bill Gross: "Bonds risky, take hard assets"

According to asset manager Bill Gross, it's better to put your money in tangible things than in stocks, bonds and mutual funds.  Writes in his latest column for asset manager Janus Capital.

"I don't like bonds and I don't like most stocks. Tangible assets such as land, gold and factories that are offered at a low price are the most interesting at the moment."

Due to extremely low interest rates, the prices of investments such as shares and bonds are rising, but the return on savings and pension money is falling. In the long run, this will cause major problems for savers, banks, pension funds and insurers, according to the asset manager that manages $1.5 billion for the Janus Global Unconstrained Bond Fund.

Bill Gross: Treasuries risky

Treasury yields are at historically low levels, but according to Bill Gross, that doesn't mean bonds are safe. 

"Bond prices are now so high that a small rise in interest rates results in a large drop in value. It's too risky and that's why government bonds aren't on my wish list."

Bill Gross also questions the monetary policy of central banks.

"The promise of central banks to one day roll back the stimulus programs and sell government bonds are just that, promises they can never keep. Central banks don't seem to have an eye for the dark side of extremely low interest rates. If they hold on to this for too long, the real economy will be affected. Expected returns will not materialize and investments will decrease."

'Pyramid scheme'

According to Bill Gross, the economy in the United States needs to grow by 4 to 5 percent, the Eurozone needs growth of 3 to 4 percent per year, and the Japanese economy needs growth of 2 to 3 percent.

"Without this growth, we won't be able to pay the interest charges and the credit-based economy will turn into a pyramid scheme, and a pyramid scheme will eventually collapse like a house of cards."

Bill Gross' words are telling, especially when you consider that he worked for Pimco, the largest bond fund in the world, for years. Due to central bank policy, interest rates have become artificially low and no longer accurately reflect the real risk.

Bill Gross: "Bonds are risky, choose hard assets"