Tags: bill | gross | pimco | fear

Gross: Sovereign Default Fear Will Haunt Markets

By    |   Wednesday, 10 Feb 2010 08:33 AM

Fear that several European countries may default on their government debt will continue to put pressure on financial markets, says Pimco managing director Bill Gross.

Greece, Portugal, Spain and Ireland all face heavy debt burdens.

“The magnitude is not the same as the subprime crisis, but to a certain extent, they're similar,” Gross told CNBC.

The similarity is that the woes in Europe are making investors question all the assets they have driven upward in price over the last year.

“Global markets for 12 months have been re-levered on the back of government and central bank credit creation," Gross said.

“Think of this as a balloon that’s been expanded. . . . Now we’re beginning to question the pricing of all risk assets.”

For example, the Standard & Poor’s 500 Index soared 72 percent from its low last March to Jan. 19. But since then it has dropped 9 percent.

The default fears themselves are probably overblown, Gross says.

“We don’t sense that Greece is a risk from the standpoint of actual default. It will be resolved."

But given the fear raging among investors that view may be ignored.

And many experts say there is a good chance that the euro will collapse.

“The whole thing is a blunder. Greece, Spain and Ireland were fattened up for 10 years by low interest rates and ultra fast growth. Now they’re oven ready like Hansel and Gretel,” says economist Charles Dumas.

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Fear that several European countries may default on their government debt will continue to put pressure on financial markets, says Pimco managing director Bill Gross. Greece, Portugal, Spain and Ireland all face heavy debt burdens. The magnitude is not the same as the...
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2010-33-10
Wednesday, 10 Feb 2010 08:33 AM
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