While controversial, the Federal Reserve's aggressive monetary policy, called Quantitative Easing 2 (QE2), has certainly been nice for investors. Not only have equities surged, but so have commodities. Nice, huh?

But according to Bill Gross, who manages the world's largest bond fund (Pimco), things may get turbulent when QE 2 ends in June. After all, where will the next big catalyst come from?

Bond money managers are usually glum. Then again, they need to be cautious since they are locking up money at fixed rate of returns. In a volatile world, this can certainly be a risky proposition.

So it should be no surprise that the biggest bond money manager, Bill Gross, is not enthusiastic about 2011. He leads the Pacific Investment Management Co., which has $1.2 trillion under management.

Will mortgage rates, currently at/near generational lows, and bond rates, head lower in the quarters ahead?

That could be the case if one of the world's premiere rate experts is correct. PIMCO's Bill Gross said the U.S. Federal Reserve is unlikely to raise key, short-term interest rates for two to three years, Bloomberg News reported Friday.

For the first time in history, U.S. government debt -- now $13 trillion -- will surpass GDP in 2012, based on forecasts by the International Monetary Fund. Bill Gross of PIMCO calls this a "debt super cycle."

The key problem with such a huge debt is that investors will demand a higher return, which translates into higher interest rates. The interest cost alone on $13 trillion will put an added burden on the government and the people.

Bill Gross further commented that "If real interest rates were ever to go up instead of down," our economic growth will not be enough to support borrowings.

"When it comes to bond managers, you won't find better than Bill Gross, founder and Managing Director of Pacific Investment Management Company (PIMCO)," asserts Amy Calistri.

The editor of The Daily Paycheck explains, "Gross is considered the world's foremost fixed income authority. And when you own the PIMCO Corporate Income Fund (PCN), you tap into his expertise and enviable track record.

She continues, "Since its inception in December 2001, the fund has enjoyed an average annual return of +11.3%. And Gross doesn't generate those returns by holding high-risk junk bonds. The fund's portfolio has an investment-grade credit quality.

Two steps forward, one step back regarding Europe's debt crisis. Just when it looks like the debt crisis will be contained, and credit markets will start to normalize, one of the world's leading bond managers sees more problems ahead, in a year or so.

PIMCO's Bill Gross, who heads the world's largest bond fund, said a debt restructuring for Greece is all but inevitable, later if not sooner.

"The growth required in order to shoulder Greece's debt burden is so excessive and the fiscal restrictiveness being imposed on the country is so restrictive they there will be no way out," Gross told Bloomberg News Wednesday.

If you are considering putting more of your money into bonds, you are not alone.

Putting his money where his mouth is, famous Pimco bond manager Bill Gross just invested $7 million in three of his own funds.

Gross recently bought a total of 1.1 million shares in the Pimco Corporate Opportunity Fund (PTY), the Pimco Income Strategy Fund (PFL) and the Pimco Income Strategy Fund II (PFN).

So what do these funds invest in?

One of the world's premiere bond fund managers is recommending that investors view credit ratings issued by ratings agencies with a critical and skeptical eye.

Pimco's Bill Gross, in a commentary published on Pimco's website, said ratings agencies are necessary, but their services are overpriced and their evaluations are subject to the influence of the issuer, "which in turn muddles their minds and clouds their judgment to say the least."

This was set up for a good day, but ADP employment data projected about 23,000 jobs were lost rather than some 40,000 created. This lowered the unofficial expectations for Friday's unemployment data and non-farm payrolls data. Then came the weaker than expected ISM data from Chicago, which effectively sealed the fate for a weak trading day.

Bill Gross of PIMCO also noted that stock and bonds might have sub-par returns for years. With the negative macro-news flow today, a drop of 50 DJIA points after the run up we have seen lately might be considered a win.

Here were today's unofficial closing bell levels:

Dow 10,856.63 -50.79 (-0.47%)
S&P 500 1,169.43 -3.84 (-0.33%)
Nasdaq 2,397.96 -12.73 (-0.53%)

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There's bad news and good news regarding Bill Gross's latest assessment of global credit markets.

The bad news is that Gross, who heads the world's largest mutual fund at PIMCO, said government bailouts point to a global "unicredit" bond market in which sovereign debt rates mirror those for corporations, Bloomberg News reported Monday.

Bill Gross is one of the world's biggest investors. In his recent monthly letter he cites the dangers of ultra high deficits in the US.

But first, we must cite Gross' comments on the state of our democracy. He said: "Our democracy does not work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people." "When special interests even singular citizens write a check, it represents a perversion of democracy, not the exercise of the First Amendment..."

Here's another priceless quote: Referring to the money spent by health care lobbyists, he said: "What amazes me the most of all is that politicians can be bought so cheaply."

Just call it the first, major adjustment of the post-financial crisis era: PIMCO's Bill Gross said Wednesday investors and markets need to prepare for the eventual reduction in monetary quantitative easing funds and the end of other stimulus programs.

If exit strategies proceed as planned, "All U.S. and U.K. asset markets may suffer from the absence of the near $2 trillion of government checks written in 2009," wrote Gross, who heads the world's largest mutual fund, in a PIMCO commentary published Wednesday.

The housing bubble and subsequent "Great Recession" have tarnished the stars of a good many of the world's financial wizards, such as the former heads at Lehman Bros. and Merrill Lynch. But one respected image remains -- perhaps unsurprisingly -- on top: Warren Buffett, chairman and CEO at Berkshire Hathaway Inc. (NYSE: BRK.A).

That's according to a recent quarterly poll of investors, traders, and analysts who subscribe to Bloomberg terminals, those somewhat cryptic news and data computers that are ubiquitous on Wall Street. Buffett, who received favorable nods from 25% of those participating in the poll, walked away with a plurality of the vote, Bloomberg News reported.

Why would the government want a weak dollar? To get some perspective on the dilemma facing the Fed, let's go back to the Clinton years. During the 1990s, we had a booming economy. That booming economy fostered a strong dollar policy (i.e., strong economy equals a strong dollar).

Now the tables are turned and we are in the worst recession since the 1930s. We are mired in debt and our unemployment keeps rising. The housing market, while improving somewhat, is still in shambles. Banks are short of money to lend, keeping a lid on expansion, and on and on. So then we have the reverse of the 1990s.

Don't be confused by the rhetoric you read and see in the media. We are definitely in a deflationary spiral. Who says so? And what data are you looking at?

Let's read a few quotes from leading traders and analysts:

• Nobel laureate Joseph Stiglitz said: "Deflation is definitely a threat right now."
• Charles Evans, Federal Reserve bank president says: "Disinflationary winds are blowing with gale force effect."