Bill Gross, chief investment officer at Pimco, expects the downward path of home prices to dominate Fed policy over "the next several years." While Gross expects the Fed to lower short rates from 4.75% to 3.75% over the next six to twelve months, he believes that the Fed may be reluctant to do so because of fears of a run on the U.S. dollar or because of "false hopes of a housing bottom." In his October 2007 "Investment Outlook," Gross opines that the powerful nonbanking private system of derivatives and credit structures can have a much more powerful effect on credit liquidity than the deposit-and-lending banking system. Click here for Gross' October outlook.
Gross oversees $692 billion in investments at Pimco, including the $104 billion Pimco Total Return Fund. For the year-to-date and the 10 year annualized periods through September 30, 2007, the returns of the Total Return Fund's institutional shares are in the top 2% of similar funds as tracked by Morningstar.