Tags: Gross | Deflation | pimco | Grantham

Bill Gross, Investors Flee Deflation

By Dan Weil   |   Tuesday, 03 Aug 2010 07:40 AM

Big-time money managers like Bill Gross, Jeremy Grantham, David Tepper and Alan Fournier are growing concerned about the threat of deflation.

And they’re adjusting their investments accordingly, The Wall Street Journal reports.

With the global economic recovery in a tenuous state and governments unlikely to provide much more stimulus, the deflation risk has grown, Gross and the others say.

In the U.S., consumer prices rose only 1.1 percent in the 12 months through June, and actually fell 0.1 percent annualized over the past two years.

"Deflation isn't just a topic of intellectual curiosity, it's happening," Gross, chief investment officer at Pimco, told the Journal. “It's an uncertain world that's tipping toward deflation."

To counter the threat, Gross recently has been snapping up Treasuries for Pimco's Total Return fund.

As for the other worriers, Grantham founded money management firm GMO, Tepper runs the hedge fund Appaloosa Management, and Fournier runs the hedge fund Pennant Capital.

"The U.S. economy has to grow north of 2 percent to avoid deflation, and we're right around there," Fournier told the Journal.

Some Federal Reserve officials are expressing worry about deflation too.

"We have to be ready for the idea that if there's further shocks to the economy, we could get into a deflationary scenario," St. Louis Fed President Bullard James Bullard told Reuters.

If the economy deteriorates, and the Fed doesn’t respond adequately, we could face Japan-style deflation, he says.

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Big-time money managers like Bill Gross, Jeremy Grantham, David Tepper and Alan Fournier are growing concerned about the threat of deflation. And they re adjusting their investments accordingly, The Wall Street Journal reports. With the global economic recovery in a...
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