US, UK, Japan on the Fiery Hot Seat, Here’s Where to Invest Instead

Pimco manages the world’s largest bond fund, and its co-CIO & founder Bill Gross has recently posted an extra hot spotlight of scrutiny on the US, the UK, Japan, Italy, France, Spain, Ireland, and Greece. They are all in his “ring of fire” chart, which depicts the countries most vulnerable to slowed economic growth due to their excessively high levels of public debt. This chart is scorching…


Here’s an explanation from the Investment Outlook:

“Each of several distinct developed economy bond markets presents interesting aspects that bear watching: 1) Japan with its aging demographics and need for external financing, 2) the U.S. with its large deficits and exploding entitlements, 3) Euroland with its disparate members – Germany the extreme saver and productive producer, Spain and Greece with their excessive reliance on debt and 4) the U.K., with the highest debt levels and a finance-oriented economy – exposed like London to the cold dark winter nights of deleveraging.

“Of all of the developed countries, three broad fixed-income observations stand out: 1) given enough liquidity and current yields I would prefer to invest money in Canada. Its conservative banks never did participate in the housing crisis and it moved toward and stayed closer to fiscal balance than any other country, 2) Germany is the safest, most liquid sovereign alternative, although its leadership and the EU’s potential stance toward bailouts of Greece and Ireland must be watched. Think AIG and GMAC and you have a similar comparative predicament, and 3) the U.K. is a must to avoid. Its Gilts are resting on a bed of nitroglycerine.”

Every day there’s more coverage of the huge debts, and new risks, associated with developed nations. IOUSA sounded the alarm long before this was mainstream news, and David Walker, a star of that film, former US Comptroller General, and now president and CEO of The Peter G. Peterson Foundation, will be speaking about it at this year’s Agora Financial Investment Symposium. If you’re interested in learning more about the must-attend annual event there’s an early bird discount available here.

Also, read more about the patterns Gross sees, as well as potential opportunities in developing nations, in his February Investment Outlook.