In an exclusive interview with Maria Bartiromo on FOX Business Network’s "Mornings with Maria ," bond legend Bill Gross, Portfolio Manager at Janus Capital Group provided his opinion on Greece, China and the potential enduring financial crises the world is experiencing today.
Gross believes a Greek deal will get done. He noted that the ministers of both sides, certainly in Greece and other EU nations have to vote on it and that will take place shortly.
“So the deal, which includes $50 billion worth of euros until 2018 keeps them alive for three more years, will be done,” Gross noted. “But I think it is a large kick-the-can type of program, Maria, and we will face these types of crises not necessarily in Greece but elsewhere for a number of years.”
Gross stressed the fact that global growth is absolutely necessary.
“Without real growth, for instance, of 2% to 3% in the U.S. and a little less in euro land and maybe 5% in China, we are likely to experience an enduring cycle of crises similar to what we've seen in the last few weeks," he said.
The volatility impacting the Chinese stock markets and the nation's economy has also been a big story in the news as of late.
Regarding China, Gross pointed out that one of their leading stock markets, specifically the Shanghai Composite, was down 40% in the space of two weeks, which is substantial.
“They lost $4 trillion worth of capital, market capital, which is equal to the GDP of Germany and 10 times as large as Greece. So it was a serious situation," Gross said.
He did note, however, that the markets have come back in China over the last two days, but said these are markets that are certainly state regulated and are not open.
“Half of the stocks on this exchange in particular have not traded and are not allowed to trade. So this isn't open market capitalism. And I think it is more of a gamble than an investment," he said.
When asked about where the next big trade is, Gross said there are three areas.
“We've talked about two of them, Greece, China and Puerto Rico,” noted Gross and “they are all indicative, I think, of what financial leverage and high levels of debt can lead to if economic growth does not follow.”
Gross said you have to follow the “bouncing ball” in terms of growth.
“If it's not there, you have a potential crisis. Monetary policy for the past five years, which includes 0 percent interest rates, trillions of dollars of quantitative easing by central banks around the world have been partially successful in elevating stock and asset prices but relatively impotent in returning growth to historical norms," he said.
He believes Puerto Rico has to be addressed in the United States in terms of what they call Chapter 9 bankruptcy. But it has close to $80 billion worth of debt and it's the next one on the list.