Gross says Fed move may be ‘too little too late’ amid turmoil

Capitalism Distorted

Gross, 71, joined Janus almost a year ago after leaving Pacific Investment Management Co., where he once ran the world's biggest mutual fund. He now manages the $1.5 billion Janus Global Unconstrained Bond Fund. The fund lost 1.9 percent this year through Aug. 31, putting it ahead of 46 percent of peers, according to data compiled by Bloomberg.

Gross, who previously forecast that the Federal Reserve would raise U.S. interest rates this month by 25 basis points, reiterated a previous warning that the extremely low interest rates of the past years risk distorting capitalism. The only way to fix the economy would be for governments worldwide to start investing to create demand.

Recent market volatility is "but one sign that something may be amiss in the global economy itself — China notwithstanding," he wrote.

With global policies discouraging economic expansion, investors should lean on cash or "near cash" instruments such as short-term corporate bonds. He quoted Will Rogers amid the Great Depression, who said he was more concerned about the return of his money rather than the return on it.

"In the long run though, the return of your money will likely not pay for college, health care orretirement liabilities," Gross wrote. "Finance-based capitalism with its zero-bound interest rates has now produced global imbalances that impair productive growth and with it the chances for 'old normal' prosperity."