Bill Gross: The cleanest dirty shirt

Bill Gross, co-founder of Pimco and manager of its $289bn Total Return bond fund, warned in early 2010 that gilts were "resting on a bed of nitroglycerine". High and fast-rising debt made Britain vulnerable to a credit-ratings downgrade, the thinking at Pimco went. His pronouncement fed the clamour for austerity to placate bond investors.

But now Gross has changed his tune. "The UK and almost all of Europe have erred in terms of believing that... fiscal austerity, in the short term, is the way to produce real growth," he now says. "It is not. You've got to spend money." Bond markets want growth, but many countries are tightening their belts too fast.

His rethink on austerity isn't his only change of course in recent years. In 2011, he advocated avoiding US debt entirely, which left his fund trailing almost all its rivals, marking a rare poor year, notes Dan McCrum in the Financial Times.

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Back then, Gross was worried that the US Federal Reserve's quantitative easing might lead to inflation. Today, he notes that the Fed hasn't been able to create inflation or growth, perhaps partly because of a combination of overly rapid austerity and low-cost competition from emerging markets.

Until the Fed can create some growth, "I don't see a bond bear market on the horizon", he says. Fed buying and relatively low inflation will keep the 30-year bond bull ticking over. Gross now doesn't see the Fed raising interest rates until 2015 at the earliest.

The bottom line is that Treasuries are still overvalued, but look more stable than pricey corporate bonds and equities. Central banks' monetary experiments have meant that "almost all asset markets are bubbles and mispriced". US government debt, however, is "the cleanest dirty shirt".