Perspectives on the global economic meltdown

Bill Gross, who runs the world’s biggest mutual fund at Pacific Investment Management Co., said investors should seek “less levered” countries like China, India and Brazil that are “less easily prone to bubbling.” “The old established G-7 and their look-alikes as they de-lever have lost their position as drivers of the global economy.”

Gross recommended that investors should look for “a savings-oriented economy, which would gradually evolve into a consumer-focused economy,” adding that miniature examples of China, India and Brazil would be excellent examples.

China’s growth is forecast to accelerate to 10 percent this year, the International Monetary Fund said in a forecast released today, up from the 9 percent projected in October, after 8.7 percent last year. India’s economy will expand by 7.7 percent in 2010, the report said, compared with the October forecast of 6.4 percent.

Emerging and developing economies will increase 6 percent this year, a 0.9 percentage point increase from the previous forecasts, according to the report. Next year they will expand 6.3 percent.

Gross increased the $201.7 billion Total Return Fund’s investment in developed markets outside the U.S. to 16 percent from 5 percent in December, bringing it to the most since October 2004, according to Pimco’s Web site.

The U.K. is “a must to avoid,” Gross wrote in the commentary published today. “Its gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks for bond investors.”

Among developed countries, Gross recommended Canada and Germany. “Given enough liquidity and current yields, I would prefer to invest money in Canada,” Gross wrote. “Its conservative banks never did participate in the housing crisis and it moved toward and stayed closer to fiscal balance than any other country.”

“Germany is the safest, most liquid sovereign alternative,” Gross wrote. However, “its leadership and the EU’s potential stance toward the bailouts of Greece and Ireland must be watched. Think AIG and GMAC and you have a similar comparative predicament.”