Tag: Bill Gross

How Main Street Will Profit? (UPDATED)

In the world according to Bill Gross.

The premise is that the bailout is good for everyone – that may be true, otherwise you may wind up paying ten bucks for a gallon of gas. But the idea that the Treasury is going to buy assets at 65 cents on the dollar (that private parties are bidding 15 cents for), and squeeze a profit out of it, is disingenuous at best.

At worst, perusal of the comments on the WaPo op-ed would make you think the recent Pew poll that suggested 57% of the public favored a bailout is in need of a serious resampling.

MORE: A key point of the profit analysis is the “hold-to-maturity” price (Bill Gross’s “lengthy ownership of the assets”), while Warren Buffett says the Treasury should pay market price if they expect to stay in the green. ┬áThe banks won’t be liking that.

PIMCO still whining – now attempting humor as well

Bill Gross of bond fame has been whining for some time. Reason: his portfolio at the PIMCO Total Return Fund is full of GSE bonds and he knows it’s going down, down, down.

His latest blathering is veiled in an attempt at humor (more like an inane distraction, but bear with me) – the entree is some ludicrous poll comparing Louis Rukeyser with Jim Cramer. I don’t much care for “investment media”, mostly because I believe they are nothing but stock shills being compensated somewhere, someplace. In other words, a lot are frauds, skirting securities law for the dis-benefit of the gullible investing public. Added…Gross thinks Cramer is a daring pundit (because he was once a money manager himself). Sure – and a money manager that blew up (but saved his own ass via his oft-touted ‘trust’) just like Bill Gross will probably do. But Cramer does have a house on the beach with oil under it – some are impressed so I guess that makes him okay.

Bottom line – Fannie Mae and Freddie Mac were the closest thing to socialized medicine for the housing sickness of the late 80’s/early 90’s as anyone could imagine who lived through the New Deal Era. Gross became the famed bond investor while riding the wave of easy money – now management ineptitude (and basic economics) are coming back to haunt the GSEs and their investors, and Gross is begging for the US Treasury to bail him out.

If I was the CIO of an insurer or pension fund, I’d be running from the GSE-overweighted bond portfolios like you might if approached at a cocktail party by someone that was recently busted cheating on their spouse with a farm animal.

And after reading Bill Gross’s diatribe, which at once beckoned for a new bull market in bonds while simultaneously putting the onus on the Fed to make it happen, maybe he should think about a new poll – that which decides whether investing in GSE paper is more like running with bulls…or sleeping with sheep.

MORE: Barry Ritholtz asks “WTF is up with PIMCO?” and notes that the “quasi-homage to Cramer” was just plain “weird”.

Tuesday’s financial links

Just numbers

Credit Derivatives May Lose $250 Billion…?

According to Bill Gross:

“Credit-default swaps are perhaps the most egregious offenders” in today’s banking system, Gross wrote on the company’s Web site today. “Our modern banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever.”

Agreed in theory, but not necessarily in quantity. Based on the prospective notional value of credit default swaps at December 2007 of around $50 trillion, Gross’s estimate would put defaults at around 0.5%. Certainly, a lot of these swaps were hedges against other swaps, but the rate still seems darn low.

Pimco’s Gross Says Fannie, Freddie Mortgage Bonds Offer ‘Compelling Value’

Of course Bill Gross is saying this. Around half of the PIMCO Total Return Fund is tied up in the agencies’ paper (at least last time I checked).

Did someone expect him to give a “Fannie and Freddie suck…they’re DOA. I’m throwing in the towel.” ???

Pimco’s Gross Urges Bush to Bail Out U.S. Homeowners

Bailing out U.S. homeowners, or bailing out PIMCO? With better than 50% of PIMCO Total Return Fund tied up in mortgage-backed securities, I have to wonder about the sincerity of Mr. Gross’s “proposal.”

UPDATE: Pleading on the long-term, while quietly dumping the short-term.