Bill Gross Says Deflation A Growing Possibility

Famed bond investor Bill Gross on Monday warned that deflation remained a growing possibility despite aggressive monetary policies by central banks around the world.

In his second investment outlook letter since joining Janus Capital Group Inc, Gross said history showed that economies experience periods of inflation and deflation, and both "are the enemies of stability and growth."

"Prices change," Gross wrote in his November outlook, "and while they usually go up these days, sometimes they do not. We are at such a moment of uncertainty."

The roughly $7 trillion pumped into the financial system since the financial crisis by the world's three biggest central banks has succeeded mostly in lifting prices of securities rather than the cost of goods and workers' wages, he said.

"Prices go up, but not the right prices," Gross wrote.

Gross, who oversees the Janus Global Unconstrained Bond Fund, said Alibaba Group Holding Ltd shares had soared from $68 to $92 in the first minute of their public debut, but other prices, including wages, "simply sit there for years on end.

"One economy (the financial one) thrives, while the other economy (the real one) withers," he said.

Gross, whose letters to investors are as famous for their quirky asides and analogies as for their economic and market analysis, called himself a "philosophical nomad disguised in Western clothing" in his latest investment outlook.

In April, Gross dedicated the first half of his widely followed investment outlook letter to his dead female cat and headlined it "Bob." The following month, Gross, who is sometimes known as the world's Bond King, discussed sneezing: "A sneeze is, to be candid, sort of half erotic, a release of pressure that feels oh so good either before or just after the Achoo! The air, along with 100,000 germs, comes shooting out of your nose faster than a race car at the Indy 500. It feels sooooo good that people used to sneeze on purpose."

In Monday's missive, Gross said: "Sand forms the foundation of my being and its porosity is at once my greatest strength and deepest wound," he wrote. "If a collective humanity is to be rooted in sandy loam, spreading its ideological seeds through howling winds only to root in mutant form at different places and different times, can we judge an individual life?"

"Concrete, as opposed to porous sand, provides a firmer foundation for judgment, but sand I suspect is the soil into which we are insecurely grounded," he continues. "All one thing, masquerading as ourselves."