NEW YORK (MONEY Magazine) - In the past decade, we've ridden two jaw-dropping bull markets. First came stocks. Now real estate is the bubble du jour.

It's tempting to think of these different assets as sitting on a seesaw, with one naturally rising as the other falls.

But listen to bond market heavyweight Bill Gross and you might start to think of your investments as being spread across an air mattress as it's being inflated: Press down on one part and another pops up, but gradually everything gets higher and higher.

Gross thinks this mattress is just about full, which could mean a long period, perhaps a decade, of low returns.

"Almost all assets people can buy -- bonds, stocks or houses -- are back in the 4 percent to 6 percent mode," Gross says. "If people are expecting 10 percent-plus returns, they're in trouble."

Gross isn't the only one who's concerned. In a speech this summer, Federal Reserve chairman Alan Greenspan worried out loud that investors in all types of things aren't demanding enough return for the risks they're assuming -- that is, they're paying too much.

"History has not dealt kindly with the aftermath of protracted periods of low risk premiums," he warned. And it's a good bet that Greenspan's likely successor, Ben Bernanke, is thinking hard about these questions too.

Gross believes that the U.S. economy in recent years has been largely driven by this asset inflation and that there's just not a lot of oomph left.

Why listen to Gross?

He's one of the planet's most accomplished, and closely watched, investors. His Pimco Total Return portfolio (PTTAX), a staple of 401(k)s, is America's third-largest mutual fund.

MONEY 50 pick Harbor Bond (HABDX), a lower-cost retail version of Total Return, has outperformed 97 percent of intermediate-term bond funds over 10 years.

Now for a few grains of salt. Bear in mind that Gross invests in bonds and sells bond funds, and his low-return future makes his product sound relatively enticing since it's less risky than a stock. (To be fair, he's been publicly bearish on bonds at times.)

And his record on big-picture calls is spotty. In 2002 he famously said the Dow should fall to 5000; he later wrote, "I temporarily lost my mind." And he was predicting an era of 6 percent returns just before the late-1990s boom too.

"In terms of investment alarm clocks, mine goes off at 4:30 when it should go off at six o'clock," Gross says today. "I tend to be a little bit early, but okay after that."

So Gross ain't gospel. In an unpredictable world, bull markets are always possible. But Gross makes a solid case for why you shouldn't count on them. It starts with understanding how the asset air mattress got so puffed up.

Over the past 25 years, three powerful economic forces have been bullish for all kinds of investors.

The Friendly Fed Since the 1970s, inflation has become a smaller and smaller economic threat, thanks to a combination of globalization, technology and credible monetary policy. That has encouraged Greenspan, our chief inflation fighter, to generally hold key short-term interest rates low. Lately he's pushed rates to 4 percent from just 1 percent in 2003, but they were at 6 percent in 1995.

The Complacent Investor Investors (and that includes you, Mr. and Mrs. Homeowner) have gotten used to the idea that inflation is under control, rates will be low, and growth will be steady. Since the world looks less risky, they're willing to pay more for assets.

By some measures, this optimism is still reflected in stock prices -- despite the crash, price-to-earnings ratios are higher than they were in the 1980s and early 1990s. Likewise, bond investors no longer demand much extra yield for taking on added risk, mortgage lenders are willing to extend easy terms, and home buyers are happy to stretch to get more house.

The World Bank American consumers are famously lousy savers -- personal savings slipped below zero in 2005 -- and the federal budget deficit is north of $300 billion. But all our borrowing hasn't led to high interest rates because the rest of the world is pouring its spare cash into the U.S. bond market.

Bernanke attributes this to a "global savings glut." Gross describes the phenomenon as a global lack of demand, but it amounts to the same thing: U.S. companies seem inclined to sit on their profits rather than invest them, and all those countries we're importing oil, cars and DVD players from aren't spending the money we send them either. Instead, they're eagerly lending it back to us.

In sum, we've been living in an extraordinary era of cheap money. Just look at your home mortgage. Cheap money, says Gross, "is a huge push for all assets."

It's not just houses and financial paper. The art market is booming. The Wall Street newsletter Grant's Interest Rate Observer notes record sales for Thoroughbred horses. Gross, an avid stamp collector, recently acquired a single 1868 1 cent stamp in a swap worth $3 million.

Many market watchers look at all of the above and see a looming disaster. There are a dizzying number of ways in which all these trends could reverse -- and quickly.

The Chinese, for example, could decide they have better things to do with their money than lend it to us. "It's not impossible that they could one day flood the market with Treasuries," says Gross. Rates could jump while simultaneously the dollar tanks, inflation rages and the economy stalls. Such a short, sharp shock would hit investors across the board.

But Gross isn't betting on it. He sees little inflationary pressure and argues that the global savings glut, and thus low rates, will take a while to unwind.

"Asians and the OPEC countries are culturally high savers," he says. What's more, many countries are experiencing the same aging trends we are.

A world that's preparing for a retirement wave will likely want to keep saving. But even if Gross is right, that just means there's no crash. Gross makes a distinction between the journey and the destination.

On the journey to today's more stable global economy, and from double-digit rates in the 1980s to today's easy credit, holders of assets enjoyed fat returns as prices adjusted to reflect the good news. But now a repeat performance is unlikely.

For months now, Gross has argued that home prices have about reached their limit. Pimco even reassigned 10 analysts to the real estate beat. "Instead of looking at General Motors, they're out in Miami pretending to buy a house," Gross says. He thinks rising mortgage rates will bite soon and that consumers who've been flush with home equity will slow their spending.

For Gross, all of this adds up to a mildly bullish picture for bonds. We're not talking huge gains here, but Gross thinks the slowing housing market, coupled with that global lack of demand, should give Greenspan and then Bernanke reason enough to stop raising rates.

If they don't, Gross thinks our leveraged economy could tip into recession.

This is a controversial call. Earlier in 2005, Gross said rate hikes would stop below today's 4 percent. Many forecasters think they'll go past 4.5 percent.

"Housing prices tend to turn very slowly, and that delays whatever impact they might have on the economy," says Ethan Harris, chief U.S. economist at Lehman Brothers. Harris thinks short-term rates will hit 4.75 percent and says stocks look like a better value than long-term bonds.

In other words, you've got to be careful in bonds, especially longer and lower-quality stuff.

"Your margin of safety isn't very high," says bond manager Thomas Atteberry of the FPA funds. "And if you are right, you don't earn a lot."

Even Gross concedes that if rates hit 4.75 percent, there isn't much that looks like a good buy today.

The lesson to take from Gross isn't that nothing can ever rise by 10 percent. Instead, it's that your returns depend on more than job growth in your local housing market, or the number of doughnuts or downloads the companies you own sell.

You face some stiff macroeconomic headwinds. That gives you more reason than ever to save, and to pay attention to value with all your assets.

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