Fundsters who follow the advice and prognostication of Bill Gross may want to take a look at his latest monthly "investment outlook". The Pimco [see profile] co-chief investment officer warns bond investors against being cooked by negative real interest rates like the proverbial frog in the slowly warming pot of water.

"Much of the Treasury yield curve now rests in negative territory when compared with expected future inflation, and that should send our bond investor into a hoppin' funk," Gross writes. "Prices are already nearing the boiling point and his coupons are subzero, CPI adjusted. Total return … and our frog … are cooked, or if not they are certainly trapped in a future low return kettle of water."

Gross urges investors to "focus on the parts of a bond that are less repressed" by artificially low rates, which he likens to a frog trapped in a pitcher of milk and then churning it to butter.

"Come on frogs, make butter, not someone else's dinner. Buy cheap bonds!" 

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