In the opening session at Schwab Impact 2011 in San Francisco, both Bill Gross, founder and co-CIO of PIMCO, and LizAnn Sonders, Charles Schwab’s chief market strategist, spoke bluntly about the global markets and the economy, with Sonders a bit more optimistic than Gross.
Gross, who in his latest monthly commentary lamented the shortfalls of policymakers in both Europe and the U.S. as failing to encourage growth, and that more debt was not the way to get us out of our current debt mess, handled the first question from moderator Tyler Mathisen of CNBC.
In a conversation about the global markets, Mathisen wondered whether, as an investor, he should be worried that “my money seems hostage to a Greek prime minister?”
“You should be very worried,” Gross responded, in reference to Greek Prime Minister George Papandreou’s suggestion that the latest eurozone bailout plan should be put to a referendum by Greek voters. “At this point,” Gross continued, “it’s a question of when rather than if Greece will default.”
When Mathisen followed up by asking if Greece will remain in the eurozone, Gross argued that “they would do better to drop out and then come back.” Ever the blunt speaker, Gross then said that “Iceland is the only country that did it right; they basically told the banks to stuff it.” He suggested that if Greece doesn’t accept its bailout medicine, “it will be in trouble for the next 10-15 years.”
Speaking of market volatility on the second day in a row of tremendous stock market moves, Mathisen then asked whether it was likely that “we will have more days where something exogeneous happens,” like a statement from a Greek prime minister, and the market responds in a volatile way.” Sonders (left) said that “the short answer is ‘Yes.’ We have to face the fact that the movers of the market tend to be high frequency traders,” and she worries that “the market is more reactionary than it’s ever been before, and is not playing its proper role.”