US heavyweights clash on S&P downgrade

Bill Gross, Bill Miller and Warren Buffett have clashed over Standard & Poor’s downgrade of the US credit rating.

PIMCO’s Gross, the manager of the world’s largest bond fund, said the ratings agency showed “spine”, while Miller and Buffett both criticised the move.

In an interview with Bloomberg Television, Gross said: “I think S&P has demonstrated some spine; they finally got it right.” He added the US has “enormous problems” in terms of its debt pile.

However, Legg Mason’s Miller said S&P was “precipitous, wrong and dangerous” in lowering the rating which came after last week’s stock market selloff, Bloomberg reports.

He said the US is the “most productive economy in the world,” adding there is “simply no alternative” to the dollar as the global reserve currency and instrument of global trade.

Meanwhile, billionaire Buffett said S&P erred when it lowered the US credit rating and reiterated his view the economy will avoid its second recession in three years.

He told Bloomberg TV the US merits a "quadruple-A" rating. "Financial markets create their own dynamics, but I don't think we're facing a double-dip recession.

"Clearly what stock markets do have is an effect on confidence, and this sell-off can create a lack of confidence," he said.

Veteran investor Jim Rogers correctly predicted the S&P downgrade back in April. Speaking exclusively to our sister title Investment Week at the time, Rogers had forecast the US would lose its prized AAA-rating after S&P downgraded its outlook for the country to negative.

He said: “Eventually it will happen. Not this month, or this quarter, but it is certainly going to happen.

“The US is the largest indebted nation in the history of the world and the debt is going higher and higher.

“The government is printing money to solve this problem and I cannot imagine lending money to the US government for 30 years in US dollars at 3%, 4%, 5% or 6% interest, as the government will never be able to pay off those debts.”