GIVEN DEFLATION, EVEN THAT 2% WOULD BE HISTORICALLY HIGH:

Interest rates need to remain low, he argues, so that "debtors can survive." It would also make government debt less of a concern.

Gross acknowledges that determining the right policy on interest rates (Gross dubs it a "neutral policy") is not an easy task for Fed chair Janet Yellen or any other central banker to achieve.

But he says focusing on what the neutral rate might be is "the critical key to unlocking value in all asset markets."

Gross believes a neutral interest rate will ultimately be closer to 2%, compared with the 4% rate that Fed officials have targeted in the past.

If that's the case, Gross says stocks and real estate investments will be more attractive than cash. It would also mean that "current fears of asset bubbles would be unfounded."

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