BILL GROSS

Gross: Central Banks 'Running Out of Time' to Reflate Economies

Economic Indicators Reuters

Bond manager Bill Gross, who runs the Janus Global Unconstrained Bond Fund, said central banks are "running out of time" to reflate global economies as their aggressive policies including quantitative easing and low, even negative, interest rates are losing their effectiveness.

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In his April Investment Outlook, Gross wrote that markets and the capitalistic business models based upon them and priced for them "will begin to go south" if global economies do not produce growth.

Given massive monetary stimulus, Gross said nominal gross domestic product growth rates for the U.S. should be between 4 percent and 5 percent by 2017 while that for the euro zone should be between 2 percent and 3 percent, respectively.

On Monday, the Federal Reserve Bank of Atlanta's GDPNow model predicted U.S. growth at a 0.6 percent pace in the first quarter, marked down from an earlier estimate of 1.4 percent.

In Japan, nominal GDP should be between 1 percent and 2 percent while China should be between 5 percent and 6 percent by 2017, Gross added.

"Capital gains and the expectations for future gains will become Giant Pandas – very rare and sort of inefficient at reproduction," Gross said. "I'm saying that developed and emerging economies are flying at stall speed and they've got to bump up nominal GDP growth rates or else. Cross your fingers."

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Gross warned against investing in negative-yielding securities.

"The real market and the real economy await a different conclusion as losses from negative rates result in capital losses, not capital gains," he said. "Investors cannot make money when money yields nothing. Unless... nominal GDP can be raised to levels that allow central banks to normalize short-term interest rates, then south instead of north is the logical direction for markets."

(Reporting By Jennifer Ablan; Editing by Chizu Nomiyama)