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Wilbur Ross Advises Against a Position in Long Term Debt

“Investors would do well to steer clear of long-term bonds while the Federal Reserve continues to execute its quantitative easing, says private-equity titan Wilbur Ross.

His thinking is that yields can’t stay near historic lows forever.

“Where I’d be very wary is bonds,” Ross tells CNBC. “If the 10-year Treasury reverts back just to its average yield from 2000-2010, you know how much the price will go down?” The answer: 23 percent. “That’s a huge risk,” says Ross, chairman and CEO of WL Ross and Co.

The 10-year Treasury yield stood at 1.92 percent late Friday afternoon.

“We’ve been advising friends it’s not worth getting a few extra basis points to take that kind of downside risk for a year or two while [Federal Reserve Chairman Ben] Bernanke keeps this quantitative easing going,” Ross says.

“We’re recommending people not be in long-term debt of any kind. Instead, we’re urging our companies to borrow as much long-term fixed money as they can.”

Ross isn’t the only noteworthy investor to have a dismal view of U.S. Treasury bonds.

Warren Buffett, the third-richest person in the world, agrees that long-term U.S. government bonds aren’t the place to be. “The dumbest investment you know, in my view, is a long-term government bond,” he told CNBC earlier this month….”

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