Posts Tagged
‘Bill Gross’
by Phil - March 2nd, 2010 8:28 am
Our favorite bond pimp is in some mood this month!
Maybe it’s because, despite PimpCo’s best efforts, they failed to tank the markets last week but Gross starts his March newsletter off with this harsh chart but his words are even harsher - saying of cocktail parties:
I suppose the parties wouldn’t be so bad if there was something original to be said, or if “you” had a genuine interest in “me” as opposed to “you,” but let’s face it folks, no one does. The only reason any of us really cares about cocktail conversations is to quickly redirect someone else’s stories into autobiographies that we assume to be instant bestsellers if only in print. If not, if the doe-eyed listener seems simply fascinated by what you’re saying, you can bet there’s a requested personal favor coming when you finally shut up. “Say Bill, I was wondering if you knew somebody at…that could…” Yeah right! But, as my chart shows, 90 seconds into a typical conversation, no one gives a damn about you and your problems – maybe those shoes and that dreadful eye shadow you’re wearing, but not anything audible coming out of your mouth.
Yow Bill! Tell us how you really feel… After telling us how appalling he finds it to endure 90 seconds of our time at a party, Bill then asks for his own 90 seconds to teach us about economics. I’m not going to edit as it is about 90 seconds worth but after that opening - don’t you find it kind of hard to read what he has to say without looking for a place to throw a virtual punch?
To begin with, let’s get reacquainted with the fundamental economic problem of our age – lack of global aggregate demand – and how we got to where we are today:
(1) Twenty years of accelerated globalization incrementally undermined the real incomes of most developed countries’ workers/citizens, forcing governments to promote leverage and asset price appreciation in order to fill in what is known as an “aggregate demand” gap – making sure that consumers keep buying things. When the private sector assumed too much debt and asset prices bubbled (think subprimes and houses, or dotcoms/NASDAQ 5000), American-style capitalism with its leverage, deregulation, and religious belief in lower and lower taxes reached a dead end. There was a willingness to keep on consuming, there just wasn’t the wallet. Vigilantes – bond market or otherwise – took away…
Tags: Bill Gross, CHINA, Dollar, Euro, PIMCO, Pound
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by ilene - March 1st, 2010 9:43 am
Courtesy of Tyler at Zero Hedge
The bond king’s trade recommendation: the yield convergence trade between the guarantor nations and the guarantee nations. Additionlly, expect a convergence between government spreads and agency/corporate yields. Is this a sea change in the way credit is approached? Somewhat yes; then again, even though he is ostensibly absolutely right, haven’t many (ahem LTCM) already tried this and failed?
Full PIMCO March letter:
Don’t Care
I haven’t gone to a cocktail party in over 10 years. Granted, perpetually watching Seinfeld reruns on Friday and Saturday nights makes for a dull boy, but the alternative is excruciating. Uh, which would I prefer – solitary confinement or water boarding? I lean strongly in the direction of a warm bed and peace as opposed to a glass full of tinkling ice cubes and a room resonating with high-decibel blather. I suppose the parties wouldn’t be so bad if there was something original to be said, or if “you” had a genuine interest in “me” as opposed to “you,” but let’s face it folks, no one does. The only reason any of us really cares about cocktail conversations is to quickly redirect someone else’s stories into autobiographies that we assume to be instant bestsellers if only in print. If not, if the doe-eyed listener seems simply fascinated by what you’re saying, you can bet there’s a requested personal favor coming when you finally shut up. “Say Bill, I was wondering if you knew somebody at…that could…” Yeah right! But, as my chart shows, 90 seconds into a typical conversation, no one gives a damn about you and your problems – maybe those shoes and that dreadful eye shadow you’re wearing, but not anything audible coming out of your mouth.
During that unbearable minute-and-a-half, however, you’re likely to have covered some of the following topics:
- Where are you from? (If it’s not a place where I’ve been or have a distant second cousin – don’t care.)
- How’s the family? (If Johnnie is in advanced placement courses and my kids aren’t – don’t care. Don’t care about your kids’ soccer games either or that upcoming wedding.)
- Medical problems. (Unless you’re dying from cancer – don’t care. Your artificial hip and kidney stone stories are important only to let me tell you about mine.)
- How’s work? (Forgot where you work, but it’s a good lead in. Don’t really care though unless you can direct some business my way.)
- Can you…
Tags: Bill Gross, government spreads, march outlook, yield convergence
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by ilene - February 3rd, 2010 8:57 pm
Courtesy of The Pragmatic Capitalist
James Carville, the famed political strategist once said:
” I used to think if there was reincarnation, I wanted to come back as the President, or the pope, or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
In today’s world, the bond market runs through Bill Gross, the Founder and CEO of PIMCO. The soft spoken Californian, former professional blackjack player and billionaire, oversees over one trillion (with a T) dollars in assets under management. He has been referred to as the 4th branch of the U.S. government and with the bond market under his thumb it’s not a stretch to say that he is the most powerful man in the United States.
His current outlook for the U.S. economy is not particularly rosy (read his latest outlook here). Gross recently coined the term “the new normal” when talking about the post-crisis economy. He believes the global economy has been effectively reset as investors take on less risk, de-leverage the mountain of debt, regulation hampers growth and de-globalization takes hold. He believes this is best presented by the low expectations in the bond market where 10 year treasuries, at 3.5%, are still positioned for very meager economic growth. He says we are entering a sustained period of low growth and low inflation.
A year ago, Gross was seen as a co-conspirator of sorts in the government bailouts. As the U.S. government began to take stakes in financial institutions Gross jumped in head first with them. He piled his firm’s assets into the riskiest of risky assets in what turned out to be a brilliantly simple bet – the U.S. government won’t let these assets fail therefore, we are wise to invest along side them. It couldn’t have worked out much better for the bond king. He is rumored to have netted $1.7B alone on the day of the Fannie and Freddie bailouts. Some saw it as talking his book and asking for his own bailout. Others see it as unrivaled power and brilliance.
Gross believes the U.S. economic recovery has been largely based on the stimulus and that the economy could suffer a relapse when the stimulus is finally removed. In preparation he says investors are wise to move money into stable, conservative income generating assets. He also says assets are likely to move from debt-laden governments such…
Tags: Bill Gross, conservative fixed income assets, economic recovery, investors, PIMCO, Stimulus
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by ilene - January 8th, 2010 1:40 pm
Courtesy of Market Folly
The following is a guest post from FirstAdopter.com, a site covering investing and consumer technology news:
—–
There’s a lot of conspiracy theories out there about how the government is manipulating the stock market upwards (I’m looking at you Zero Hedge) by buying stock futures, etc. However a light bulb went off in my head after I read this Time magazine interview with Pimco’s Bill Gross on how simple the explanation is.
But secondly, there’s a ripple affect. Just speaking about Pimco’s general portfolio strategy, we’ve sold our agency mortgage securities, Fannie and Freddie, in the billions to the willing check of the Fed. They’re buying a trillion dollars of them, or have over the past 9-12 months, and so we sold them a lot of ours. Now, what did we do with the money? We bought Treasuries, we bought corporate bonds, and so the bond markets in general have benefited, as have stocks because this available money effectively flows through the capital markets. So it’s a trillion-and-a-half dollar check that won’t be there as the Fed withdraws from the market. How that affects the markets, I just don’t know. I’m not eagerly anticipating the answer, but I think it holds some surprises in 2010, not just in mortgage securities but stocks as well.
So basically Bill Gross, the largest fund manager in the world, explains it to us. The Fed has been buying $1.5 trillion worth of securities from financial firms at unnatural supply/demand and some would say inflated prices, who then use this big pile of money they get from selling to the Fed to buy other stuff like corporate bonds and stocks. This is $1.5 trillion that did not exist before. It is printed money that is flowing through the financial capital markets lifting all boats. A simple explanation for the markets’ rise.
To prove this let’s look at the timing of Fed mortgage backed security buy program announcements. In 2008 the SP500 bottomed on November 21st, 2008. I remember things being very scary then. The Fed then announced their first $500 billion mortgage backed security (MBS) buy program on November 25th, 2008 (Link). The market then rallied 25%+ off the low and topped on January 6th, 2009.
The market then tanked again and bottomed on March 6th, 2009. I remember things being even scarier then. The Fed decided to…
Tags: Bill Gross, fannie, freddie, liquidity, mortgage backed security, mortgage securities, PIMCO, Stock Market, the Federal Reserve
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by ilene - January 7th, 2010 11:33 am
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Courtesy of Zero Hedge’s Tyler Durden
In a pathological example of nearly clinical hypocrisy, PIMCO’s Bill Gross yesterday dedicated 4 meandering essay pages full of polemical ramblings to the characterization of America’s sad political and financial hybrid reality. Yet the billionaire’s saddest message is precisely the self-deluded aggrandizement that Gross decries yet willfully takes advantage of every single day. Because after bemoaning the fate of America’s broken political system, and ridiculing the Federal Reserve’s kleptocratic-friendly ways, it is precisely people like the PIMCO chairman that are most guilty of taking advantage of every single loophole presented to them, even as they criticize just this activity. This, beyond all the petty trivialities that Gross discusses, is precisely what is most wrong with America - at this point everyone, and especially Mr. Gross, knows too well that the wealth transfer from the middle class to the elite 1% of society will not end until such time as America itself defaults. Yet having the very people that benefit the most from this, write non-apologetic letters in which they criticize the very system that lets them walk home every day with an extra zero in their bank account simply due to their special connections within this very broken system, is beyond reproach.
Gross writes:
Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people… What amazes me most of all is that politicians can be bought so cheaply.
Well, Gross should know all about special interests and bribery. A casual check indicates that the PIMCO boss himself donated $6,900 to future present Barack Obama in 2008, and another $4,000 to the Democratic Senatorial Campaign committee. What was the IRR on that investment Mr. Gross? Just how many special Treasury JVs is PIMCO part of these days, and how much taxpayer money ends up in the Newport Beach bond manager daily, to simply trade side-by-side with the Federal Reserve and front-ru(i)n the broader investing public? Was Obama the cheapest politician you could buy?
We were so appalled with the result of this query that we decided against checking further back in time to see just what the price of bribery for prior presidents was. However, we did check how much of a "special interest" PIMCO itself is - to our (lack of) surprise, Mr. Gross, your company has spent at least $431,101 to…
Tags: 2010, Bill Gross, PIMCO, the Fed
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by Zero Hedge - January 7th, 2010 8:57 am
Courtesy of Zero Hedge’s Tyler Durden
In a pathological example of nearly clinical hypocrisy, PIMCO’s Bill Gross yesterday dedicated 4 meandering essay pages full of polemical ramblings to the characterization of America’s sad political and financial hybrid reality. Yet the billionaire’s saddest message is precisely the self-deluded aggrandizement that Gross decries yet willfully takes advantage of every single day. Because after bemoaning the fate of America’s broken political system, and ridiculing the Federal Reserve’s kleptocratic-friendly ways, it is precisely people like the PIMCO chairman that are most guilty of taking advantage of every single loophole presented to them, even as they criticize just this activity. This, beyond all the petty trivialities that Gross discusses, is precisely what is most wrong with America - at this point everyone, and especially Mr. Gross, knows too well that the wealth transfer from the middle class to the elite 1% of society will not end until such time as America itself defaults. Yet having the very people that benefit the most from this, write non-apologetic letters in which they criticize the very system that lets them walk home every day with an extra zero in their bank account simply due to their special connections within this very broken system, is beyond reproach.
Gross writes:
Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people… What amazes me most of all is that politicians can be bought so cheaply.
Well, Gross should know all about special interests and bribery. A casual check indicates that the PIMCO boss himself donated $6,900 to future present Barack Obama in 2008, and another $4,000 to the Democratic Senatorial Campaign committee. What was the IRR on that investment Mr. Gross? Just how many special Treasury JVs is PIMCO part of these days, and how much taxpayer money ends up in the Newport Beach bond manager daily, to simply trade side-by-side with the Federal Reserve and front-ru(i)n the broader investing public? Was Obama the cheapest politician you could buy?
We were so appalled with the result of this query that we decided against checking further back in time to see just what the price of bribery for prior presidents was. However, we did check how much of a "special interest" PIMCO itself is - to our (lack of) surprise, Mr. Gross, your company has spent at least $431,101 to…
Tags: Bill Gross, PIMCO, Politics, Zero Hedge
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by ilene - January 6th, 2010 1:59 pm
By John Curran, courtesy of TIME
Pimco managing director Bill Gross not only oversees the world’s biggest bond fund, his views often sway markets. In a late December interview with TIME’s John Curran, Gross pointed to the second half of 2010 as a period when investors large and small will reckon with a new reality of poor economic growth and a Federal Reserve that is hard pressed to offer much help.
TIME: Where do you see the economy going over the next 6 to 12 months?
Bill Gross: The economy should be relatively strong in the first half of 2010 then weaken in the second half. That’s not to say we’ll return to recession but we’ll see weakness as opposed to a continuation of what will probably be a decent first half.
What will make the first half of 2010 so good?
The first half will be dominated by government stimulus and by inventory accumulation or a lack of [inventory] liquidation among businesses. I expect nothing from consumer [spending] and nothing really from housing or really any of the standard cyclical leading sectors. It’s hard to put a number on GDP growth rates, but let’s say 4% in the first half and then 2% in the second half, which would basically call for some additional help.
You’re talking about a second shot of federal stimulus?
Yes, something else is probably needed if the [government's] thrust is really reducing unemployment below double digits and re-normalizing the economy.
What does this say about the Federal Reserve’s hopes to start pulling its added liquidity out of the markets, either by raising short-term rates or just getting out of buying bonds, which has been keeping long rates low?
I think the Fed’s statements suggest that they really want to exit in some fashion from the buying program. The first step in that direction, logically, would be to stop buying and our sense is that they’re at least going to try that. But based on our forecasts for the second half of the year they may have to re-initiate it, and that will be difficult to do once they stop because it then becomes a political hot potato.
All that said, I think they’ll stop buying mortgage agency securities, and the trillion-and-a-half dollar check that’s been written over the past 9 to 12 months basically disappears. It’s significant from the standpoint of interest…
Tags: Bill Gross, Economy, Federal Reserve, Germany, government stimulus, Interest Rates, mortgage agency securities, PIMCO, Recession, U.S. treasuries
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by ilene - January 6th, 2010 12:50 pm
Courtesy of The Pragmatic Capitalist
Deep thoughts on 2010 from PIMCO’s bond guru:
Quixotic journeys often make for great literature, but by definition are rarely productive. I am, after all, referring to windmills here – not their 21st century creation, but their 17th century chasing. Futility, not productivity, was the ultimate fate of Cervantes’ man from La Mancha. So it is with hesitation, although quixotic obsession, that I plunge headlong into a discussion of American politics, healthcare legislation, resultant budget deficits and – finally – their potential effect on financial markets. There will be windmills aplenty in the next few pages and not much good can come of these opinions or my tilting in their direction. Still, I mount my steed, lance in hand, and ride forward.
Question: What has become of the American nation? Conceived with the vision of liberty and justice for all, we have descended in the clutches of corporate and other special interests to a second world state defined by K Street instead of Independence Square. Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people. Washington consistently stoops to legislate 10,000-page perversions of healthcare, regulatory reform, defense, and budgetary mandates overflowing with earmarks that serve a monied minority as opposed to an all-too-silent majority. You don’t have to be Don Quixote to believe that legislators – and Presidents – often do not work for the benefit of their constituents: A recent NBC News/Wall Street Journal poll reported that over 65% of Americans trust their government to do the right thing “only some of the time” and a stunning 19% said “never.” What most politicians apparently are working for is to perpetuate their power – first via district gerrymandering, and then second by around-the-clock campaigning financed by special interest groups. If, by chance, they’re ever voted out of office, they have a home just down the street – at K Street – with six-figure incomes as a starting wage.
What amazes me most of all is that politicians can be bought so cheaply. Public records show that combined labor, insurance, big pharma and related corporate interests spent just under $500 million last year on healthcare lobbying (not much of which went to politicians) for what is likely to be a $50-100 billion annual return. The fact is that American citizens have never been as divorced…
Tags: American politics, Bill Gross, budget deficits, budgetary mandates, Don Quixote, earmarks, exit strategies, financial markets, First Amendment, healthcare legislation, healthcare lobbying, K street, politicians, Presidents, Representatives, Senators, special interests
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by Phil - December 18th, 2009 7:58 am
Where is our Santa Clause rally?
We usually have one. Even last year the Dow went from 8,149 on Dec 1st to finish at 8,776 on Dec 31st. This year, we’re lower than we were on Thanksgiving and challenging the 10,200 line, the lowest we’ve been since Nov 9th. Why has Santa Clause forsaken us? Most likely, it’s because we already got our Christmas present in November, when the Dow ran from 9,712 on the 2nd to 10,406 on the 16th. That was when we threw in our bullish towel as it was way over our 2009 target (9,850), which is based on fundamental market valuations, rather than Christmas wishes.
We still face serious headwinds in the economy and, as I’ve said many times this year, the current market valuations are ignoring the risk factors of owning equities - an amazing thing considering how recently those risk factors showed up and bit people’s faces off both last fall and this spring. For example, according to the NYTimes this morning, American International Group, Fannie Mae, Freddie Mac and GMAC, are not only unable to repay the government, they are in need of continuing infusions that make them look increasingly like long-term wards of the state. The total risk they pose to the taxpayer far exceeds that of the big banks. Fannie and Freddie, in the final days of the year, are even said to be negotiating with the Treasury about greatly expanding the money available to them.
While some banks are repaying TARP funds, these wards of the state need MORE money or we are right back to the default risk that sent the market plunging last year. What else sent the market plunging last year? Oh yes, it was credit default swaps. We still have many hundreds of Trillions of those nasty little suckers outstanding and now the cost of insuring sovereign debt against default in Europe is right back to where it was in March, when we thought the World was ending. “It’s going to prove extraordinarily difficult for countries to cut back on budget deficits,” said Ciaran O’Hagan, a fixed-income strategist at Societe Generale SA in Paris. “Many countries are facing severe difficulties in coping with the economic downturn.”
Credit-default swaps on Portugal’s debt jumped 6.5 basis points to 80 today, CMA prices show. Hungary climbed 13 basis points to 243, Spain increased 5 to 98 and Germany rose 1 to 23. The contracts pay the buyer face value in exchange for the…
Tags: AIG, Bill Gross, CHINA, Credit Default Swaps, FNM, FRE, GMAC, GS, JPM, MS, PIMCO, TBT
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by Phil - November 20th, 2009 8:18 am
How can a firm that never loses money be so totally wrong?
Just this Monday, Goldman Sachs helped to gap the markets higher at the open in low-volume futures trading with the following pronouncement: "Goldman Sachs resumes coverage on Dell Inc. (NASDAQ: DELL) and gave DELL a Buy rating at a 12-month price target of $19. Goldman believes that DELL will benefit from a corporate PC refresh cycle and will show better earnings as DELL is trying to optimize its cost structure. Goldman believes Dell will report better than expected earnings and beat analysts’ expectations. Goldman expects DELL to report earnings of $1.09 for CY2009 and $1.37 for CY2010 from their previous estimates of $1.07 for CY2009 and $1.35 for CY2010." Fact is, they missed by a mile.
That report took Dell up 2% for the day and the Dow gained 150 points and we were dumbfounded by the move, both in DELL, who were swallowing a difficult acquisition of Perot Systems and of the market, which acted like $31Bn DELL is the same kind of bellwether that $120Bn HPQ is, even if Goldman’s report had been even close to accurate. As it was, they couldn’t have been more wrong if they were playing "opposite day." How is it that a firm that has only 3 losing trading days in 6 months can be this amazingly wrong on crucial analysis?
So is Goldman actually stupid and, as many have implied, simply cheating to rack up their amazing market gains or are they intentionally manipulating the markets. Former GS-employee Jim Cramer jumped right on the bandwagon on Monday afternoon and told viewers that "obviously," since DELL is going to do so well (because GS says so) that INTC and MSFT must be buys too.
This is how manipulative stock pumping works - start a rumor, push it out through the media, extrapolate the rumor out to affect market-moving stocks that don’t even have upcoming news events and then tell people they are missing an opportunity, even after the train has left the station (by Cramer’s 2:30 spot on Monday, the Nasdaq had already hit the high for the week, peaking out exactly at the moment Cramer told his retail investors to pile into the market).
Were the beautiful sheeple only buying what Cramer’s buddies were selling? Is that how GS makes their money, buying low on Friday, making an upgrade on Monday, getting their pals to sucker people into the "rally" and then dumping into the retail…
Tags: Bill Gross, Cramer, DELL, DIA, Dollar, FXP, Goldman Sachs, GS, INTC, Market manipulation, MSFT, Trichet, UUP
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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