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Thursday, March 31, 2011

Gross Assails US Debt as Greek-Like

If you actually click on the link to read Bill Gross' article, it's even more scathing than this summary makes it sound.

View this article on our website: Gross Assails U.S. Debt as Greek-Like

Gross Assails U.S. Debt as Greek-Like

Article published on March 31, 2011
By Joe Morris

Pimco's Bill Gross has ratcheted up his criticism of federal budget policy, implying he will not favor Treasurys until Congress tackles entitlement spending.

In his monthly investment commentary posted to Pimco's website, Gross calculates the country's unrecorded debt burden at close to 500% of gross domestic product, warning "we are out-Greeking the Greeks."

The comments shed light on Gross's decision, revealed earlier this month, to dump Total Return's entire holdings in U.S. government–related debt, including Treasury debt. A disclosure on the firm's website reveals that as of Feb. 28 the $236.93 billion fund's government-related debt portion was zero, compared with 12% a month earlier. No update has since been posted.

Gross does not reference the Total Return move specifically in his latest commentary but does muster an argument against holding Treasurys. Without congressional cutbacks to Medicare, Medicaid and Social Security, he contends, the country will effectively default through rising inflation, currency devaluation and low to negative real interest rates.

Pimco "has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden," he writes. "Our clients... do not want to be shortchanged or have their pockets picked."

 
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