Bill Gross says take chips off the table as end to asset increases nears

In latest outlook report, Janus bond manager, using Punch and Judy to analyze central bank policies, wonders how a debt crisis can be solved with more debt.

Bill Gross, who left Pacific Investment Management Co. in September to join Janus Capital Group Inc. (JUCIX), recommended that investors reduce risk and prepare for asset prices to stop increasing.
“Markets are reaching the point of low return and diminishing liquidity,” Mr. Gross wrote Thursday in his investment outlook for December. “Investors may want to begin to take some chips off the table: raise asset quality, reduce duration and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, QE and the trickling down of faux wealth to the working class.”
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Mr. Gross, 70, known for his colorful investment commentaries, suggested that the creation of more debt by policy makers worldwide to solve the credit crisis will be judged by future generations much like smoking in public or discrimination against gays is viewed by people today. The investment outlook, titled “How Could They,” also referenced Punch and Judy to analyze central bank policies.
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“Can a debt crisis be cured with more debt?” Mr. Gross wrote. “I suspect future generations will be asking current policy makers the same thing that many of us now ask about public smoking, or discrimination against gays, or any other wrong turn in the process of being righted.”
‘BYE-BYE’
Mr. Gross in October started managing The Janus Global Unconstrained Bond Fund after his surprise exit from Pimco, the bond firm he had co-founded in 1971. In an investment commentary in October, he said investors should bid “bye-bye” to double-digit returns as growth worldwide is slowing down, in a scenario that he and Pimco first expressed in 2009, called “new normal.”
Thursday he wrote that there are “structural headwinds” that make it difficult for central bankers worldwide to solve the debt crisis with quantitative easing.
“How could they?” Mr. Gross wrote. “How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt?”