Bill Gross is the manager of the largest bond fund (Pimco’s $244 Billion Total Return bond fund) on the planet, but from his latest investment letter it sounds like he is a supernatural investigator of spirits from another dimension with his Paranormal Economic 2012 forecast.

Describing the 2012 market environment as “paranormal,” Gross said this year will be distinguished by “credit and zero-bound interest rate risk” and far less incentives for lenders to lend. This is because banks and other financial go-betweens make their money off of the spread between their borrowing rates, and their lending rates. When lending rates are depressed, money dries up, because banks can’t make a profit unless lending rates exceed their borrowing rates by more than, a certain amount. Currently, the spreads are much lower than they need to be. Gross remarks, “It is no coincidence that tens of thousands of layoffs are occurring in the banking industry, and that branch expansion is reversing industry wide.”

Stating that the financial markets this year will continue to delever (basically the elimination of debt), but sees a gloomy future ahead. Gross went on to say, “It’s as if the Earth now has two moons instead of one and both are growing in size like a cancerous tumor that may threaten the financial tides, oceans and economic life as we have known it for the past half-century,” Gross said in an investment letter titled “Welcome to 2012” that was released on Pimco’s website.

Gross said “paranormal” was a more apt description for the current economic environment than the phrase “New Normal,” which was created several years ago by his co-chief investment officer, Mohamed El-Erian, which typifies a world of low growth and high unemployment. This year, Gross foresees that things will get messier.

“We are left with zero-bound yields and creditors that trust no one and very few countries. The financial markets are slowly imploding — delevering — because there’s too much paper and too little trust,” he said.

Speaking in technical terms of probability theory, the previously mentioned factors may lead financial markets to experience “the fat-left-tailed possibility of unforeseen — delevering — or the fat-right-tailed possibility of central bank inflationary expansion.” As he stated earlier, delivering can be painful and inflation is kicking the “pain” can down the road, except now it has lots of painful interest with it.

Gross warned investors that they should lower their investment return expectations, anticipating a 2 percent to 5 percent returns on investments in stocks, bonds, and commodities for this paranormal economic 2012.