Pimco's Gross: Leave U.S., Buy Abroad

Bill Gross of Pimco Total Return(PTTAX Quote) and Bob Rodriguez of FPA New Income(FPNIX Quote) say investors should prepare for a prolonged recession and more turmoil in bond markets. For protection, the bond managers recommend owning government-backed securities and avoiding riskier corporate debt. Their views carry weight because they have long records for making accurate forecasts.

Gross's pessimism is especially noteworthy. As manager of the $150 billion Pimco Total Return, the largest bond fund, he has long been an influential figure whose moves are closely watched by other managers.

During the past decade, Gross has finished in the top half of the intermediate-term bond category during nine years. By avoiding subprime mortgages, he outperformed 98% of his competitors in 2007, according to Morningstar. Last year the Pimco fund finished in the top quarter of the field with bets on AAA-rated securities. ...