Gross: How investors can avoid pain of credit supernova


Bill Gross, manager of the world's largest bond fund, has compared the US economy to a supernova on the path to extinction as it has become too reliant on credit and real growth is being eroded.

Gross said the initial magic of credit creation has turned less "magical" and in some cases even destructive as it begins to consume credit markets at the margin as well as portions of the real economy.  He compared the US economy to the Japanese credit market, which was a "supernova" that exploded and contracted in on itself. "With interest rates close to zero for the last decade or more, a sharply declining rate of investment in productive plants and equipment, the best evidence is the Japanese credit market," he said. "Money and credit may be losing heat and running out of time ...

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