Investors have watched the precipitous fall in the U.S. dollar over the past few years with trepidation. Investors in Israeli stocks trading in the U.S. have witnessed the once-lowly shekel dominate the dollar (and most other global currencies) over the past two years. It looks, at least from some uber-investors' perspectives, that the dollar may be set to reverse -- a boon for those companies with significant sales in the U.S.

Bloomberg has an article out this morning saying that bond guru, Bill Gross, the manager of the world's largest bond fund, the $129 billion Pimco Total Return Fund, has turned negative on the euro for the first time since its inception in 1999. According to the article, Gross's firm, Pimco, believes that according to purchasing power parity, a measure used to account for differences in exchange rates across countries, the euro is overvalued by 30%.

And Gross isn't the only one who is concerned that Europe may suffer a bigger slowdown than the U.S. in a world confronted with slowing growth and financial snafus. The same Bloomberg article says that according to a recent poll conducted by Bloomberg of global strategists, many think that the euro has seen its day and that the dollar is poised for a rally (hard to believe in the face of Fannie Mae and IndyMac).

Europe's Trichet-led Central Bank has signaled that it may be done raising rates. In fact, given the choice between fighting inflation and re-energizing a sputtering economy, some are betting that the ECB may need to actually lower rates. With a Fed-led plan to bailout the U.S. banking system and the bottoming out of the dollar, it looks like Gross and Co. are betting against the euro for years to come.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Perhaps the most well regarded bond manager in the country, Bill Gross of Pimco, is making a huge gamble on mortgage debt. The Pimco Total Return Fund, which invests $130 billion, has tripled its exposure to mortgage debt instruments.

According to the FT, Gross is counting on the US government to partially bail out the housing industry. He told the paper that "his decision to raise exposure to mortgage debt in recent months was based on the US government's implicit guarantee of Freddie Mac and Fannie Mae, the government-sponsored mortgage agencies."

Of course, counting on the government to do anything is a bit risky, but Gross is probably making a good bet that the US will not let the housing situation slide much more than it has already. The risk to the entire economy is too great.

Gross could be right, and, if he is, Pimco investors stand to make huge returns on the fund.

Douglas A. McIntyre is an editor at 247wallst.com.

In the world of fixed income, as in the world of markets in general, there is almost no one whose predictions are worth listening to.

Bill Gross is an exception and, in an interview with Kiplinger, he gave his bleak outlook on the economy and a tip for investors: We are probably in a recession, and it's not going to be a quick easy one. And what should you do with your money? Well it isn't as exciting as what most gurus will tell you:

The most attractive area, the one that's been tossed away for a number of reasons, is the municipal-bond area. There are hundreds of closed-end municipal-bond funds that trade on the New York Stock Exchange. Many trade at 5% to 10% discounts to their net asset values and at yields of 5%, plus or minus.

Municipal bonds have been tossed away for several reasons. One: they're not bought by the Chinese or by the Saudis. The Saudis have no use for a municipal bond and its tax advantages. That's one of the reasons they haven't gone up in price and down in yield.

His rationale, as always, seems to make great sense. To lean more about how to think like Bill Gross, check out The Bond King: Investment Secrets From Pimco's Bill Gross.

One good sign of a bottom is when the media is panicking and the shrewdest investors aren't afraid to be contrarians. We may reached the point in the subprime crisis.

According to The Wall Street Journal, Pacific Investment Management Co. (Pimco) is planning to launch a $2 billion distressed-debt fund, hoping to play the role of "vulture" picking up subprime debts on the cheap as weaker hands dump them in panic.

According to The Journal, this could be a sign that credit markets are "beginning to adjust to the market turmoil." Pimco sports an impressive roster of talent, most famously Bill Gross, who has been called the "Peter Lynch of bonds." The firm also just lured Mohamed A. El-Erian back from his role managing Harvard's endowment.

While investors probably shouldn't run in and start buying Novastar Financial (NYSE: NFI) first thing in the morning, this could be a sign that the worst of the subprime woes are over. Savvy investors may want to look into putting money in a high-yield bond ETF.

As the New York Times Dealbook pointed out yesterday, references to Paris Hilton and jokes at her expense have become all too widespread of late. For that reason, this post will endeavor to contain only a modest number of Paris Hilton jokes.

Bill Gross, the once-proud bond guru at PIMCO, mentioned Paris Hilton three times in his July Investment Outlook:

Whew, that was a close one! Ugly for a few days I guess, but it could have been much worse! No, I refer not to Paris Hilton upon her initial release from the LA County pokey after serving three days of hard time, but to the Bear Stearns/subprime crisis.

In a record-setting one-day stamp auction that raised sales of $9.1 million, billionaire bond fund manager Bill Gross unloaded a series of early British stamps featuring a young Queen Victoria. The proceeds raised were donated as one sum to Doctors Without Borders; it was the medical organization's largest donation ever received in its 36-year history.

The top lot auctioned Monday morning included two items. The first was described as "the largest surviving mint Penny Black multiple still in private hands," consisting of 18 stamps, coupled with a strip of six stamps that were separated from the larger bunch. The two pieces together were ultimately sold for $1 million to an unnamed bidder. Attending the auction were bidders from the U.S., Canada, the U.K., France, Switzerland, Belgium, China, and Italy.

Gross said he began collecting the stamps in question around 2000, spending an estimated $2.5 million on them. While today's auction benefited a charitable cause, it also helped Gross gauge the market for collectible stamps. Mr. Gross is one of the largest U.S. collectors and estimates having spent between $50 million and $100 million on his collection (that's kind of a wide range, but who am I to quibble?).

I was listening to NPR's Marketplace this morning only to be assaulted by a stunning statistic -- Bill Gross, the manager of the largest bond fund, $102 billion Pimco Total Return Fund, thinks that housing prices could fall 20%. Is Gross right? If so, what should you do?

Gross's assumption is that 2003 was the last time home prices were 'normal' -- based on lower interest rates and demographics. He believes that since then, prices have jumped above that normal value and will therefore drop 20% in order to get back to where they belong. (This is not just idle speculation: home prices in Irvine, CA have already sunk 17% since June.) Gross believes that despite the Fed's talk of inflation vigilance, such a drop in housing prices will lead the Fed to cut interest rates from 5.25% to 4% to cushion the economic pain.

I think Gross may be right. As I've noted here, inflation continues to be a problem. But the Fed seems to be counting on an economic slowdown to solve the problem. And if housing prices do fall 20%, the economic impact may cause the Fed's fear of deflation to exceed its fear of inflation -- due to excess productive capacity in the U.S. economy.

What you should do depends on your situation. If you were thinking of buying a house, wait two years so you can buy after prices have tumbled and sellers are more desperate. If you must sell, cut your price and get out immediately. If you can wait to sell -- I would suggest holding for at least a decade which is how long I think it will take for things to return to normal.

I think 2007 is the year when home owners will be jolted into the realization that trees do not grow to the sky and prices can indeed drop. What do you think?

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.

Bill Gross, of Pimco fame, joined the chorus of Warren Buffett and others saying the U.S. dollar is "doomed." Gross made these comments in this weekend's Barron's Roundtable (subscription required).

Gross repeats the same comments as many others: the twin deficits (federal and trade) will force the country to inflate its way out of the deficits. This is pure nonsense.

The U.S. dollar will go down relative to some currencies due to other countries becoming wealthier. This is a good, not a bad thing. Emerging economies will provide goods and services at competitive prices and the market will reward those countries with a stronger currency.

This is exactly what happened to Japan in the post-World War II era. Japan started off making low-end trinkets and then moved up the value chain, becoming a powerful global economic participant. Its currency appreciated relative to the dollar along the way.

The same will happen to other currencies. China was the prime example in 2006 as it began to manage the appreciation of the yuan.

When you hear all this negative babble that the U.S. currency is doomed, take it with a grain of salt. The dollar weakening because other economies are doing smart things is a good, not a bad thing. History has shown that as long as the U.S. keeps inflation between 2% to 2.5%, then a weaker dollar is manageable.

When PIMCO's Bill Gross speaks, bond traders listen. That certainly happened today when he gave an interview on CNBC.com.

Basically, he predicts a sluggish economy next year. Expect the real estate market to be a big drag, he says. And expect to see more job losses.

One more thing: The bad times will be worldwide.

If all this happens, the Fed will get aggressive and slash interest rates. How much? Try 2-3% on the 10-year Treasury.

Sounds kind of crazy, huh? Except that Gross is not a crazy guy. After all, he manages the biggest bond fund.

If you want to check out some of Gross's analysis, you can check out the PIMCO website.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.