What Bill Gross Is Buying

Bill Gross oversees $790 billion at asset manager PIMCO, more than the gross domestic product of most countries, and has posted impressive returns. Lately the King of Bonds is sounding grim. He expects slower U.S. growth, lower corporate profits and a lower standard of living for years to come. He also sees bargains aplenty.
On a rainy mid-December day at his Newport Beach, Calif., office, the 64-year-old explained to Forbes why, as fearful investors pile into Treasuries, he's moving in the opposite direction. Excerpts, (edited for clarity) below.

Bill Gross: Government bonds happen to be the one asset that people want to own during a deleveraging cycle. They weren't leveraged up by hedge funds and mom and pop investors. We were busy buying homes and stocks and risky assets…

…Now we're deleveraging, and [almost] all assets are going down in price. This is staggering.

How much deleveraging is left?

I think we're 75% of the way through. The question is, "What's the size of the government checkbook and can it match deleveraging in the financial sector?" We think the checkbook is substantial, and sometime in 2009 assets will stop going down.