Bill Gross: U.S. economy is at ‘tipping point’ of recession

Bill Gross, who runs the world’s biggest bond fund at Pimco, says in an interview with Bloomberg that the U.S. economy is stalling and a recession is a real possibility.

In another Bloomberg interview, Harvard University economics professor Martin Feldstein said he thought “there’s now a 50% chance that we could slide into a new recession.”

For investors in TIPS, talk of recession is significant, because along with its many damages a recession brings the threat of deflation.

“We’re not looking at a recession yet, but we’re at a tipping point,” Gross told Bloomberg TV. “We’re at what we call a stall speed in which corporate profits don’t grow, jobs aren’t created.”

The Fed may arrange a third round of quantitative easing, known as QE3, Gross said. That would be significant for investors in Treasury Inflation-Protected Securities, because a third round of quantitative easing would inflame inflation fears.

But Gross repeats his oft-stated criticism of U.S. Treasuries, which he calls a ‘dirty shirt’ of investments, and notes there are ‘cleaner shirts out there.’

Watch the video

More pessimism … The Associated Press hit a home run with this lead-in today on its story about the worsening economy:

Shoppers won’t shop. Companies won’t hire. The government won’t spend on economic stimulus; it’s cutting instead. And the Federal Reserve is reluctant to do anything more.

Without much to invigorate growth, the economy may be in danger of slipping into a stupor like the one Japan has failed to shake off for more than a decade. And Wall Street is spooked.

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