Bill Gross warns against owning bonds and urges caution with stocks at record levels. He argues that credit expansion, currently at $84tn in the US with 5.9% growth, is necessary for nominal GDP growth but must be balanced. Uneven balance sheet growth, particularly from AI-related debt and government borrowing, poses risks.

Gross highlights that $1tn of AI investment forecast for 2027 is likely debt-funded, and US net debt-to-GDP is around 100%, a peacetime peak. Boomer demographics will strain social security and healthcare costs. He recommends avoiding bonds except for one-year Treasury bills at 4.55% and being cautious with stocks as higher yields may contract profit margins. He is leery of hyperscalers unless their price-earnings ratios are below 20.