Bill Gross says Ben Bernanke's "driving in a fog," even as Bernanke's frightening of the markets is pummeling Gross' flagship mutual fund.

Gross — co-chief investment officer of Pimco and PM of the world's largest bond mutual fund, the $285-billion Pimco Total Return Fund [profile] — said on Bloomberg TV's "Street Smart" that Fed chairman Bernanke was "driving in a fog" in regard to directing Fed policy, reported Bloomberg. Gross also accused Fed vice chair and rumored Bernanke heir-apparent Janet Yellen of being Bernanke's "Siamese twin" in terms of policy.

Gross is convinced that the expansive monetary policy will begin tapering off in early 2014. He added that the Fed would make a decision based on both the unemployment rate and inflation rate:

Obviously according to a 7% unemployment number that speaks in his mind and perhaps my mind to early 2014. But I might also say in terms of questions and answers, and that is critical I think, that he did speak to the conditional influence of inflation. That even if unemployment came down to 7% and inflation did not go up to 2%, they would look around and readjust their decision.

Meanwhile, Bernanke's warning this week that he might soon start phasing out quantitative easing programs was followed by performance hits for U.S. total return mutual funds, especially Gross. Alexis Leondis and Charles Stein of Bloomberg report that between Tuesday and Thursday this week, just two days, Gross' flagship fell 1.6 percent.

Other bond mutual fund PM gurus like Jeff Gundlach of DoubleLine [profile] and Tad Rivelle of TCW [profile] are feeling the pain, too, suffering two day drops of 1 percent and 1.1 percent each, respectively. At the top of the pack of total return mutual funds with at least $2 billion in assets (19 year in all), Bloomberg highlights Thomas Atberry's FPA New Income Fund [profile], which fell only 0.2 percent over the same two days this week.

Neil Anderson also contributed to this story. 

Edited by: Casey Quinlan


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