Is Bill Gross crazy?
Bill sees the Fed setting the Fed Funds Rate no higher than 2%, meaning he thinks current intermediate term bonds (3-7 year) are attractive. Meanwhile, Goldman Sachs, JP Morgan, and BlackRock disagree, saying that only longer duration bonds lasting 10-20 years will be profitable. What do you guys think? Do you think the whole fallout with El-Erian leaves him making statements that now go unchecked?
He is crazy, but it's also dangerous to bet against him on bonds. If he was making predictions about the stock market that's one thing, but he's not the bond king for being wrong.
He's crazy and based on a guy I know who works at PIMCO he's also a total douche bag. I used to think he was infallible but he's shown some weaknesses in recent years. I don't know if it was El-Erian related or what.
I had read his "Buy Cheap Bonds with Safe Spread" toad boiling article, and was convinced (stupidly) that:
a. QE was going to come to an end b. The banking sector would get crushed c. No one would be buying treasuries
Black swan, et cetera. Let's just say those call options on FAZ in 2011 worked...for a while...
He's not crazy. He's Secretariat. 'Nuff said...
He looks like he'd be the guy with a white powder under his nose constantly
And it's not too difficult to be right in a raging long-ass bond bull market
Confused here. You imply these other firms think rates are going higher than PIMCO thinks they are going....and their solution is to go longer duration? Look, I have as little respect for Goldman and JP Morgan as humanly possible, but even I don't think they're so stupid as to think that it's good to be long duration in a rising rate environment. Am I misinterpreting what you wrote?
.
It's not a stupid thing to say at all, in fact... If you actually take a look at what happens when Fed actually starts raising rates (e.g. 1993, 1999, 2004), the curve (specifically, 5s30s) flattens a lot, which does mean that long duration is the right way to be when rates actually do rise. It's NOT the right way to be "on the eve" of the hikes, which is really what this whole disagreement between Bill Gross and the others comes down to: when does the Fed actually pull the trigger. Bill Gross is, effectively, arguing for later (and, possibly, faster), whereas the others disagree.
I'm assuming Bill is saying something to the effect of, buy a 5 year because in two years, the 3 year rate will be the same or lower than the 5 year rate now and you will profit because the curve is so steep your roll down will offset rate increases. What are the other firms saying? It's hard for me to imagine JP Morgan and Goldman Sachs arguing it's better to buy 20 year bonds over 5 year bonds right now.
This is the story: http://www.bloomberg.com/news/2014-05-29/goldman-shuns-bonds-pimco-s-gr…
You can read the summary of the arguments that various peeps are making. We can discuss to our collective hearts' content afterwards.
Ok, thanks. This gives a much better context. It seems to me that the people buying 20 year bonds are targeting a specific portfolio duration and using a barbell approach to get that duration, instead of just going out and buying a bunch of 20 year bonds only. Frankly, I think Lehman Alumni Rick Rieder from BlackRock has the better approach.
Well, the more generic point stands, also, I would say... Specifically, when rates actually rise, it's often the case that the bonds that are "safer" are the longer-dated ones. That's emphatically not true on the way there. Obviously, timing is tricky and knowing when the turning point occurs is the bazillion dollar question. In this cycle, it appears that we had this key moment at the end of 2013.
C'mon now, he's rich enough to at least be called 'eccentric' not 'crazy' :)
Bill Gross: Raise my Taxes (Originally Posted: 03/07/2011)
First it was revered investor Warren Buffett. Then Bill Gates. Now, Bill Gross is joining the crowd of wealthy individuals suggesting we hike tax rates:
Yahoo Finance Tech Ticker article
Of course, the simple fact of the matter is that tax rates are pretty low on a historical basis. In fact, the original Reagan tax cuts only lowered top marginal tax rates to 50%.
Tax havens were all over the place back in the 1980s, including Western Europe, Japan, South Korea, Australia, and some of our trade partners in Latin America. In fact, aside from Eastern Europe and perhaps China, the list of geopolitically stable competitors that embrace capitailsm hasn't changed all that much over the past 30 years.
I think 90% of this forum is going to agree on spending cuts, but is it more important to maintain tax cuts or balance the budget? I personally tend to agree a little more with Bill Gross. I'd be willing to give up about 5% of my pre-tax income every year to quell speculation about national bankruptcy and the end of the American Empire- especially if those tax hikes I'm paying are matched with spending cuts.
So what say you? What kind of tax schedule would reduce your motivation to work? I'd keep working about the same under a Clinton Tax Schedule. A Reagan Tax schedule- where I'd be paying about 50% of my marginal income in taxes on top of 9% NY State taxes- would be a real bummer, though.
What is your percentage? And do you think income tax rates should be raised to supplement spending cuts and entitlement reform?
If higher taxes meant we cut lots and lots of spending and cut lots and lots of entitlement programs then that's a price i'm willing to pay
of course in reality...
agreed. Everyone's going to bitch about taxes. Everyone's going to pay them. I think it comes down to A. How much B. What it's spent on ......and no one can agree
I will pay more taxes if the government gets some common sense / business minded people in there who will actually cut spending and use our tax money somewhat wisely.
[quote=Nobama88]For the love of God. I will pay more taxes IF (BIG BIG IF) the government gets some common sense / business minded people in there who will actually cut spending and use our tax money somewhat wisely.
If we have Jesse Jackson Jr and his Ilk in there, FFS, there is no way I am willing to give them another dime.
http://www.theblaze.com/stories/jesse-jackson-jr-says-way-out-of-the-un…]
That was hard to watch....seriously.
Nothings keeping these schmucks from cutting a check to the IRS. They don't turn down donations.
Only if they cut defense spending
thank YOU!
Don't forget about this great economist and financial guru, he wants to raise taxes too...
http://news.yahoo.com/s/ap/20110225/ap_en_ot/us_people_john_legend
Regards
He has more common sense than most of the dumbfucks in the Republican Party.
Regards
Like Warren Buffet said he hates derivatives but his company has some 65$ billion of them. Its probably the same with his ideas on taxes as well.
Notice Gross never mentions raising capital gains or carried interest taxes in the article. This is because Gross has already made his millions (he spent $23 million on a house just for the lot it was sitting on. he then tore it down and built a new one on top). Its funny how the wealthy always define "the wealthy" as those who are high income earners, not those sitting on an enormous amount of net worth. Let's see these same guys call for a net worth tax. I'm sure they'd be singing to a different tune.
If the government is serious about substantially cutting the deficit, then it's pretty much a given that they'll have to raise taxes at least a little.
I'm almost always opposed to cutting taxes. That being said, if these tax hikes were in conjunction with a guaranteed cut of pork spending and entitlement programs, I wouldn't be opposed. We need to start building a country that operates on sound financial fundamentals. What we have isn't going to cut it for much longer.
The problem with the government getting any more money now is that they view that as a license to spend more. As long as they are wasting money at the rate they are, I will not give them a dime more than is mandated. If I believed they would use my money efficiently (and seeing is believing) then I wouldn't argue. Still, I find it hard to believe that they will ever be able to get a ROI comparably to any charity that'd I'd rather give my money to- there is just too much bureaucracy.
As as others have pointed out, no one is stopping Buffett and Gross from writing a check. Still, if tax rates go up, it's not the billionaries or the wealthy heirs whose standard of living will be affected, it will be those who work everyday to make their money.
Um, how about raise taxes on the millionaires and billionaires ONLY? In today's system, Warren Buffett's secretary pays more taxes than he does.
That first sentence sums up my reservations perfectly, THB
Most of the truly wealthy people get most of their income from capital gains. Raising the income tax probably isn't gonna hurt the likes of Warren Buffet very much. Instead of raising taxes for everyone, perhaps a billionaire tax is more logical. After the first billion the rest is pretty much for show anyway.
If anything, they should be arguing for lower taxes.
If they raise taxes, I'm seriously fleeing to Singapore...
Top marginal tax rates of 20%.
Total taxes in Singapore are 15% of GDP vs 28% in the US.
Higher GDP per capita than the US, prostitution is legal too.
Best financial center, period.
The problem with tax havens is that they're not very good havens on other fronts when a crisis hits.
It is the most boring place on the planet.
Also, buying chewing gum is illegal, porn is illegal, homosexuality is illegal, drug use is punishable by death, jaywalking is a jail-able offense...have fun just don't get caned!
I always get a good laugh when people say they are going to flee the US if marginal tax rates go up like 3 - 5% or if carried interest were to be taxed at 20% instead of 15%. You're not going anywhere.
Fuck, I don't give a shit how low taxes are in Singapore, I'm not leaving everything I love over taxes. Shit, I wouldn't want to miss out on stupid shit like watching football on Sunday with my friends, let alone all the other awesome shit.
That said, I do always hate when people who have amassed INSANE amounts of money talk about taxes. Tax rates are not going to affect Gross' or Buffet's wealth or standard of living at all because they've already accumulated so much money. With that said, I do think carried interest for hedge fund and PE guys should be taxed as ordinary income...because, let's face it, it's how they get their income.
Also China is definitely not a net importer of food, you are wrong.
http://www.ers.usda.gov/Publications/Summaries/chinagrn.htm
Or Harvard:
http://hir.harvard.edu/food-security-in-china?page=0,4
Fact is that China has weak food security. You sure you want to live in the shadow of one of the most powerful countries on earth when the international community is skeptical of its ability to feed itself?
At the very least, Australia is a little bit safer. You may not like US tax rates, but it's probably worth the extra 10-15% in taxes to live in a country that has its own military and produces its own food.
Oh shit I totally forgot about the cane!
"Well, I can't look at internet porn or hang out with my friends and family on a regular basis...but at least my tax rate is lower!"
Don't forget that if you have a noisy house party after 10 pm on any day of the week, cops can show up and fine you.
See the other links. Fact is that China has 20% of the world's population and 7% of the arable land. Do the math. In a famine, the country is in deep trouble. And that trouble is going to come knocking throughout Southeast Asia.
You can leave for Singapore if you'd really like. People did it in the 1930s, too- nobody is stopping you. Take the five years of tax cuts if you really want them. Just don't be surprised when there is a famine or you get invaded and your assets seized (as has happened before).
Hence the one-child policy in China as well.
The problem lies in the fact that if revenues are "raised" by increasing taxes that will not directly relate to lower deficts. Washington has a spending problem that wont be fixed by having more money. On the contrary I think it will make things worse. Besides most of these guys who are saying raise my taxes dont make a whole lot in relation to their net worth.
I bet if we added a top tax bracket that taxed income in excess of $5M a year at a 90% tax rate that there'd be essentially nothing lost as far as the productive capacity of the economy and we should use that money solely to pay down the deficit (we should still reduce spending, we should aim for a nice surplus, we're gonna need it).
The problem would lie moreso in trying to enforce something like that...
Actually, I'm pretty sure a lot of rich people would leave if taxes got that high.
On the other hand, if we restored the Clinton tax schedule and perhaps added a 42% tax bracket for all incomes over 750K-$1 M, we'd see revenues go up in the long term. Tax rates would still be lower than those under Reagan and pretty comparable with those under Clinton.
We are all slaves for the government anyway. They piss away trillions and just shake us down for more. I guess 1/3rd isn't enough. Not like we actually work for this money or anything. I suppose being a slave is cool as long as it is only 50% of the time.
How about cutting services and reducing waste. I have two parents, don't need the government taking care of me. Then again, I'm not the ones getting a free ride. I actually pay tax so why should anyone listen to what I want, I'm just a revenue generator for people who need what I've worked for more than me.
If we are going to be raped by te government at least let's have a government with balls. Nothing like favoring the weakest link of society at the expense of the strong.
Here is the thing, I agree with you that there is an enormous amount of government waste. There is no denying that. But over the past decade the biggest increases in spending have been 2 wars and a stimulus/bailout needed to prevent the economy from collapsing and to maintain a functioning financial sector. I have heard you say many times that you thought both of these things were necessary. Maybe I am missing something, but where are you to criticize excessive spending?
We needed the bailout. Not saying that all of the bailout was right, but the financial sector collapsing would fuck everyone.
Cut defense spending. I've said it a dozen times. Cut spending.
The poor pay no taxes. We have a myriad of social programs. The argument is only should we give people more free money or leave it the same. I don't get it. You pay nothing, you get a lot. What is the problem.
Seems to me that the only cuts and negotiations should be with the middle and upper class. The poor already have their cut of the pie.
You are a racist, fascist, devil for even suggesting that the people who earned the money deserve to keep it. Sony you know that the government should decide to whom your money goes. Your job is to produce and be thankful for whatever scraps then government decides you can keep.
Tsk tsk, how foolish of you to think that your money was in fact yours.
Yes s'r, yes s'r...Iz uze the backdoor from na' on s'r. LOL.
Regards
Bill Gross Leaves PIMCO (Originally Posted: 09/26/2014)
This just in, Bill Gross announced this morning that he's departing PIMCO for Janus Capital. Is this the beginning of the end for the world's largest bond manager?
http://www.forbes.com/sites/maggiemcgrath/2014/09/26/bill-gross-leaving…
Beat me to it. This is an interesting one. He is leaving the firm he founded in the midst of a very unfavorable bond environment. I think he is trying to save his reputation here. He's made some big (and costly bets) on treasuries in the PIMCO total return fund, but now he'll be managing an unconstrained bond fund with really, no reputation on the line. What do you think?
Word is that everyone is dumping PIMCO funds, even ones Gross didn't manage
we'll be seriously considering selling total return now. I still like Joe Deane, but this is no bueno.
NYT is reporting that he was going to be fired anyway.
Bill still has all the marbles even at 70 years of age. He got tired of the day-to-day grind of running and managing a massive firm like PIMCO, and decided he wanted to return to an investing role at a smaller (relatively smaller, with $160 bn AUM Janus is still a large firm) and nimbler firm like Janus. Good for him. It remains to be seen how successful he will be in his new role, but you have to give credit that the guy is still hungry/ambitious at the ripe old age of 70.
$5 says he has shtty performance going forward and Janus ends up a fat loser
I'm a big of a noob on the bond side (we outsource all of the individual security selection) but I have to think you're right here. I mean everyone has their niche, total return and real return have always been traditional products, so the fact he's going unconstrained worries me. it'd be like if all of a sudden, dreman started buying high PE small cap stocks and Seth Klarman changed to a 130/30 structure. not saying that those guys couldn't play in that sandbox, but their track records are with a different type of investing. we won't buy the new janus fund, but we may get out of our non-muni PIMCO stuff.
Why wouldn't he just retire? At 70 and worth a couple billion and he joins a new firm? Sure his performance has suffered recently but he'd be remembered as one of the all time greats regardless and just sit in the board or have some honorary title (although I've heard from people who have worked there that he's a dick). It's like the ball player sticking around for too long, leaving his team by choice or not and kicking around playing sub par ball with a few teams and fading away rather than going out on top. Joe Montana.
To an extent I agree. I would have retired long ago. But there in lies the crutch - you don't become a guy like Gross leading a firm like PIMCO because retirement is on your mind. Gross and other titans like him are who they are because they are lifelong workaholics, egomaniacs and likely huge assholes.
wonder how much of an impact redemptions at PIMCO will have on individual high-yield securities. Seems like they're going to have to dump out of positions, which could shake up the HY mkt pretty good the next few weeks..
There was tons of speculation in the market today re: redemptions
"Sharp traders instantly thought that the departure would mean even more redemptions and thus started selling against the biggest positions held by Total Return. And even sharper traders used the aforementioned thoughts applied to less liquid but still large positions like TIPS (in August filings PIMCO owned $79.8 bln TIPS and were the largest holder in 25 of the 38 outstanding issues), plus bonds like Italy sovereigns (5th largest holding at 8%) and Spain (5%) which are quite illiquid relative to treasuries (Italy and Spain were the only EGBs higher in yield on Friday. 10-year yields had dipped to 2.495%, about 0.7 bps from overnight lows, on the Q2 GDP revision that was flat vs expectations of a small increase. But on the news that Secretariat had bolted out of the PIMCO gates, 10s surged to session highs at 2.549% within about 20 minutes. Selling subsided over the course of the morning relegating range trading between roughly 2.52% to 2.54% for the balance of the day."
the article is titled 'IFR TREASURY CLOSE: TREASURIES ROILED AS SECRETARIAT BOLTS'
Wirehouses are putting their mutual funds and etfs on hold and block..
Perhaps I'm more eccentric than my current wealth allows, but in his shoes, I would go home and begin making outlandish claims that would support my personal positions (i.e., fading the market's reaction to myself). Or even start an instagram (or just buy instagram?), a geriatric homage to Dan Bilzerian.
If we're talking eccentricities, my plan, if finances allow, is to buy land in the desert and build an honest to god pyramid to be buried in. And big. And have my shit buried with me. And maybe people. But that's just if we're talking my eccentric goals.
Short Janus? +43% today. Crazy.
PIMCO has had 18 months of net outflows, speculation that their Total Return ETF are being priced incorrect, and they are underperforming their benchmark. El-Erian was the first mover and got it right.
The best part is the PIMCO CEO basically saying 'we were going to fire him anyway'. It's like one of those cheesy tv dramas: "You can't fire me.......I quit.". Just in reverse.
Maybe PIMCO will buy out Janus Capital down the line and Bill Gross will return to run PIMCO? circa apple jobs getting fired from Apple, and re-joining hmmm no but seriously why the F*** isnt he retiring, 2B of assets, just leave
Elison is still going to oversea strategic projects at Oracle. As for Gross, I wouldn't retire. As said above he probably got sick of managing a firm and wanted to go back to his roots.
Id like to see how much key man insurance Janus is getting on him.
Side note, this is what I love about wso. Great discussion on a pretty big news story.
Oh boy. I hope PIMCO doesn't cancel on-campus recruiting as a result of this.
I mean with everything going on there you sure that's where you'd want to hitch your wagon?
Sometimes, the mkts are just idiotic... Bill Gross's departure is causing moves which, collectively, just don't make any sense whatsoever.
Still, long-term this development might be a good thing for the mkt (assuming the assets don't leave the mkt, but rather get redistributed), as PIMCO was just big as a single individual account, especially in smaller mkts, such as TIPS.
Out of control left-wing-lunatics Bill Gross and Larry Fink are Supportive of Occupy Wall Street (Originally Posted: 11/22/2011)
http://www.businessinsider.com/bill-gross-and-larry-fink-on-occupy-wall…
Here's the video:
http://www.youtube.com/embed/9U1wLt9mN5g
Highlights:
Read more: http://www.businessinsider.com/bill-gross-and-larry-fink-on-occupy-wall…
...fucking communists!
There is literally only one viable solution to all this shit...
I love that TheKing gets shit for posting something that would have otherwise garnered complete support from WSO.
I'm 100% behind what they said. People throw shit about me because they don't like having their shit-bag worldview disrupted.
TheKing, I just gave you a SB to even out that shit someone gave you. I don't often agree with you, but I appreciate this post.
In all seriousness, they actually seem to get it. The right wing noise machine can yap all day about OWS being dirty hippies, and the left wing noise machine can yap all day about how great unions are, but the fact remains that the real point of OWS is very much in line with what Bill and Larry said in the video.
Also, I hope to God Ron Paul wins Iowa.
ron paul tied for first in iowa.
i am making another contribution this month. i consider it a tax to pay for our electorate's voting mistakes in the past.
Protesting government intervention in the free market and bail outs is fine. Where they lose my support is with their laundry list of anti business and basically socialistic demands. Maybe this isn't their true demands, but this is the only message I have been hearing from their sources and seeing with my own eyes.
I've been to 4 camps now (Philly, DC, NYC and Columbus) and I see an endless amount of anti capitalist, pro socialist type signs.
I've always said the underlying message of OWS has always been admirable.. just not it's people & some of the other views that have been spawned from the movement (socialism and anarchy). It's both dumb to totally sell their views off as irrelevant (Herman Cain) and you're equally as dumb if you blindly support their actions (Random Hippy #1).
1) I hope the movement gets out of NYC and moves to DC. The change must start in DC.. lets face it; protestors cant' change corporations. The only way to prevent corporations from getting involved in changing policy is to force stricter legislation upon all politicians. Hell, make every politician sign a waiver that their bank account will be monitored while they are serving.
2) I also hope the movement decidely gets out of the street and starts working from the inside out. What they really need is to find some homegrown candidates who are interested in seperating Wall St. and Gov't.
3) They need to drop the 99%/1% shit. Class warfare is not going to be a winner. By undermining the 1%, you're undermining the entire grounds that our country has been built on - capitalism. If there is not incentive to be part of the 1%, there is no reason for growth, no reason for promotions, no reason for competition. If these idiots just stopped for a second and considered what they are doing when they use the 1% in a negative light, they would rescind all statements that they flung at the things they aspired/will aspire to be.
A+
On point #2, I think this is going to start happening soon. I think some evidence that points to this can be seen in the subset of OWS that is doing a formal read through of the Volcker Rule and submitting formal comments to Congress.
I think part of the reason it's still such a raw movement is because they have refused to be co-opted. They've gotten donations, but there isn't a Big Dick Armey type ex-Washington insider with a PAC coming in to co-opt the movement. Give it time.
I have to say that I think this part of what you wrote is wrong. A lot, maybe not most, but many of the OWSers just aren't motivated to make anything of themselves. I think that is a common misconception by most people like those on WSO who are motivated to achieve success. A large portion of people in this country have no desire to become rich or wealthy unless it's gifted to them by a lottery, an inheritance or a lawsuit.
I know nearly all of my friends would love to have a high end car...who wouldn't? But many will claim it's stupid to have one and that they don't care. I always question if that is truly how they feel or if they know that they just don't want to put in the effort that is required to earn and pay for that vehicle. Just look at lottery winners. Half of them live in trailer parks and drive rusty pick-up trucks, but as soon as they win they buy a big house and fast cars.
For many people the opportunity cost of becoming part of the 1% is too high and that's fine, it's their prerogative to not want to work that hard or take the risks that are required...but don't sit around in a circle and bang a drum talking about how it's unfair that you don't have what they do when you haven't put in even a fraction of the effort.
I'm sick of people being villianized because they work hard or because they were lucky. If someone wants to spend a million dollars a year taking their pet iguana to the Caribbean to swim in the ocean then so be it...that's their choice. I hate hearing, or reading, people criticize them because 'they could use that money to feed starving kids' or whatever. Well, you could too. You could cancel your cell phone and your TV with HBO and not run your A/C and stop using hot water to shower and send all that money you save kids in Africa or where ever...but like Milton Friedman said, it's not me who is greedy, it's the other guy. Fucking hypocrites.
P.S. This wasn't a rand at you, rothyman, just a rant in general.
Regards
^^^^^
This.
They need to land a baller shoe deal or soda endorsement.
ANT. This^
Thanks for the link TheKing.
OWS has gotten far more corporate backing then the Tea Party had gotten at this point in its growth.
For some odd reason this statement doesn't seem accurate to me. At all. Don't quote me on that, though.
Are you expecting me to agree with that statement or do you think because Fink says two things are similar, from a high level perspective, it makes it right.
They are completely different and it is a matter of degree. The Tea Party is simply where the Republicans historically have been. The OWS movement is far more left than the Democrats ever were or want to be. How this is not obvious is beyond me.
The latter. Doesn't really make it "right" per se, but I feel that Fink is a little more influential than an anonymous forum poster (me). I certainly don't expect the first part to be true, as I know you never change your opinion about anything.
TheKing for Chief Monkey of WSO ! All hail TheKing !
This!!!!!
Wait, aren't OWS protestors against corporations and capitalism?
...not my logic BTW
If by tea partay you mean this.
I might have to retract my previous statement.
http://www.opensecrets.org/overview/topcontribs.php This says a lot to me
Shit I've got monkey pewp thrown at me for shilling for TheKing. Wtf ?
cphbravo with a nice strawman argument.
Wow, TheKing making accusations and/or calling names. Nice to see some new tactics from you. #sarcasm
Regards
Bill Gross' Latest (Originally Posted: 06/21/2011)
After being a little underwhelmed by the last few memos Bill Gross put out, he really hit it out of the park with his latest: School Daze
Maybe it's because he's more of a long-term, traditional asset manager, but I think Gross has as good a grasp as anybody on the secular trends our nation is facing and his Treasury bet notwithstanding, this guy is capable of some very sharp analysis. I pretty much agree with everything in this memo and it sums up a lot of what I've been thinking lately which I was quite surprised by considering how much I disagreed with his dumping of Treasuries. Great stuff.
He starts out okay but trails off into: "School bad! Harf harf harf! But science degrees good! Manufacturing jobs are down! Boo! Politicians are bad!"
Most liberal arts degrees are useless, but so are most college degrees of any kind.
I like his German polytechnic model, but I don't want the US government building/running/ruining another school system.
Manufacturing output is doing perfectly fine. His discussion of manufacturing employment is pointless.
He has some solid points regarding the impact of a balance budget. (Milton Friedman supported budget deficits and a growing economy vs. a balanced budget and a stagnant economy)
Gross ignores the broader issue being debated within the budget/debt talks: What will the role of government in our lives?
As far as the role of government in our lives, I think that's beyond the scope of the piece.
While the school thing isn't fully articulated, there's very clearly a problem in this country when virtually everyone feels compelled to get an undergrad degree (frequently from a private school) only to work in some occupation that doesn't leverage what was learned in any way whatsoever. The trend in private education has been towards ever-escalating tuition and those awful for-profit colleges. This looks like a case of market failure and the government is probably going to have to be the one to step in.
Manufacturing's been doing better thanks to our "performance" in the currency wars but the secular trends Gross discusses are very real, if nothing new. His discussion of infrastructure projects points to a way we can help preserve whatever competitive advantages we still have and help the US close some of the gap on our trade deficit.
Why should the government step in when the gov't ENCOURAGES this behavior? Politicians have been pumping $$$ into scholarships, federal loans, and the private student loan market for decades.
If it stood alone our manufacturing output is the world's 6th biggest economy! The average U.S. factory worker is responsible today for more than $180,000 of annual manufacturing output, triple the $60,000 in 1972.
Manufacturing is moving towards the widly successful agricultural model. The U.S. produces more agricultural output today—with only 2.6% of our work force involved in farming—than we did 100 years ago, when farming jobs represented almost 40% of the labor force.
The private sector has been lapping up what the US govt has been encouraging in the education sector. If something's going to change, the govt is going to have to be a part of it. It's hard to trust our elected officials with something like this but unfortunately, there's a fat chance of a private sector solution to this popping up soon. The current model is simply to profitable for anyone to break ranks.
Gross focuses on the fact that manufacturing employment, specifically, is in trouble. The agricultural model you mention, if followed, doesn't forebode anything good for our employment numbers. And as far as agriculture being wildly successful, it's still a black hole of misguided subsidies and not free market capitalism at its best by any stretch of the imagination. I'm not sure I want to see the same thing happen to our manufacturing sector.
Got it. I think we're roughly in the same area on the issues with education.
I don't give a flying f*ck about propping up one sector's employment. We need to drop the romanticism about the blue collar factory worker. The only path to wealth is in making people more productive. That means some people need to leave their current jobs or industry and move to a sector of the economy that is bidding up labor. They also need to invest in themselves for that switch if necessary.
Cut all subsidies to EVERY industry: energy, agriculture, manufacturing, automotive, education, etc.
Let employers bid for labor and push it toward its most productive use.
This sht isn't that hard! Fckin' politicians....
/end rant
I agree that Gross is off on his treasury bets, at least in the short term. A. Gary Shilling was on Bloomberg Radio today and said that if 30 year rates hit 3% (which I believe is very likely, just give it some time) one can gain 25% (or 40% with a zero-coupon bond). I still don't think we have hit the peak of the bull market in bonds that began some 30-odd years ago.
So, the man doesn't believe that college education is important. Interesting.
So then that must mean he hires a lot of people without college degrees? Oh wait he doesn't. Well surely.....oh not a single person working at his firm doesn't have a college degree?
Why are we listening to Mr Gross again? Just because a man is rich and powerful doesn't mean he isn't naive, stupid, and a hypocrite.
I think his argument is that you don't need a college degree to be a receptionist. How many receptionists have college degrees (and went into debt for them)? How many people have law degrees that aren't lawyers?
That's his argument. His argument is not that education is not valuable, just that we should think about how much we subsidize it and who we encourage to continue pursuing higher education. If everyone got a PhD, how useful would having a PhD be? Only benefactor is the big government-subsidized leviathan known as higher education.
I think someone posted this on here (or I got it from somewhere else, don't remember...)
There is a difference between decrying the generally sh*tty education offered at US colleges (even at HYP) and deciding to obtain what is an essential credential (a Bachelor's degree) absent an alternative method for employers to evaluate inexperienced labor.
A monopoly might piss you off, but you will still buy their product if you need it bad enough.
monkeysama, Bill Gross expressly states in his piece that he's not in the Peter Thiel camp of paying kids not to go to college. Nobody plans to be a receptionist when they go to college but those who do usually didn't have any plan when going to college, they just knew that's what they "should" do. The flipside of everyone going to college is that if you don't, you're probably doing even worse.
Gross praises Germany. But their labor force is set to roll over within a generation from middle class high-skilled, German/English speakers to low skilled, Arabian immigrants.
The polytechnics aren't going to pick up that slack.
Hmm, they're the people keeping their retirement system from imploding at the moment. Kids of those immigrants grow up learning German and going to good schools.
In the USA... YES, we do a wonderful job of transitioning each Mexican generation to productivity, English, etc.
Emphatically untrue in Europe. Immigrant groups, especially Muslims, stay in ghettos and ethnic enclaves. They are not progressing from generation to generation.
Bill Gross suing PIMCO for $200M (Originally Posted: 10/08/2015)
Bill Gross the co-founder of PIMCO is suing his old firm he built for 40 years. http://www.nytimes.com/2015/10/09/business/dealbook/william-gross-sues-…
Oh, butthurt Billy, what are we going to do with you? Like a teenage boy after getting dumped.
Does Janus not pay him?
He only manages like $1.5 billion at Janus. That's peanuts compared to what he was overseeing at PIMCO.
Don't know what his problem is. He will go down as a legend (even in spite of the ugly breakup with PIMCO) and is well off.
Get your popcorn ready is this is likely going to get ridiculous at PIMCO portrays his "increasingly erratic" decline and he counters back.
I do think it's extremely odd though that this is so long after the fact.
His douchebaggery knows no bounds....
From the filing:
1 . Driven by a lust for power, greed, and a desire to improve their own financial position and reputation at the expense of investors and decency, a cabal of Pacific Investment Management Company LLC ("PIMCO") managing directors plotted to drive founder Bill Gross out of PIMCO in order to take, without compensation, Gross's percentage ownership in the profitability of PIMCO. Their improper, dishonest, and unethical behavior must now be exposed.
4 . In addition to receiving compensation consistent with his skill and reputation, Mr. Gross was also well-known as an advocate for PIMCO's investors. He championed reasonable fees for PIMCO's services and was vocally skeptical inside the firm of a select group of the younger executives' desire to transform PIMCO into ahigh-risk, high -fee asset -management company that invested in riskier equities and leveraged real estate investments, as opposed to the stable bonds that built the firm's reputation.
5 . As long as Mr. Gross remained at the company he founded, these younger executives were unable to transform PIMCO, increasing client risk and their own compensation. As a consequence, Mr. Gross became the taxget of a power struggle within PIMCO a struggle that eventually led to his wrongful and illegal ouster from the company he founded and a struggle where PIMCO wrongly and illegally denied Mr. Gross hundreds of millions of dollars in earned compensation.
His ego is way too big. Hope PIMCO puts up a fight.
Didn't he say proceeds from the suit would go to charity? Sounds legit to me... jury's gonna love that.
PIMCO has been completely annihilated since his departure and yet hardly any of the assets that have flooded out of Total Return followed Gross to Janus. Was a huge gift to folks like DoubleLine, Dodge & Cox, BlackRock, and probably Capital and the other big diversified AMs. More important than any potential damages figure, this suit will continue to inhibit PIMCO's ability to generate positive flows. Well played, sir.
Completely annihilated? Haha stop talking crap, they still manage $1.5tn. You call that annihilated? The Total Return Fund that Gross ran at PIMCO represented only 10-15% of the total firm's assets. That fund has indeed seen assets decrease by more than 50%. Funny though that the PIMCO TRF has outperformed Gross' fund at Janus by a serious margin since Gross left PIMCO.
Would be interesting to know what Mr. Gross's employment contract read. How is it he forfeited his revenue stake. I think if Gross was found guilty of gross negligence or malfeasance, perhaps, but "erratic behavior", steady work performance decline ? PIMCO will have to prove that.
I don't think it is going to get to trial, it will get settled.
bill gross (Originally Posted: 01/31/2007)
watching him now, i'm still not used to the lack of 'stache
stache is gone?? since when?
Is he on your floor? or are you watching him on TV or something
no, it was on cnbc right after the fomc announcement
Bill Gross Investment Outlook May 2010...Awesome (Originally Posted: 05/05/2010)
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Lovin+S…
.......
BILL GROSS AND THE "SEEING EYE TOILET" (Originally Posted: 07/29/2010)
For those of you who haven't had a chance to read it yet, Bill Gross of PIMCO has some choice words (as usual) to say about the economy.
Do you think his point is valid? I get the feeling he is over dramatizing a dilemma, without actually covering all the variables (tech/shift of spending habits of the elderly into a more gratification oriented mindset etc....). What do you guys think?
I think his point is valid, scary too. Our generation is in for some pain!
haha his first paragraphs were very funny
Lol watch them replace all the toilets in their Newport Beach HQ with the old models.... this is power........
I read the article pretty fast because I am in the middle of something, but I would like to mention something that might be missing from that article.
Yes, world birth rates are declining and yes you need more people to buy more stuff, but even with birth rates declining you can still have a growing global economy. We have probably 2 Billion or more people living in utter poverty. Once all of them are driving SUV's with 9 LCD TV's and a McMansion like Americans then we can worry about less people creating less consumers and less GDP.
Absolutely not disagreeing with Gross, just saying that GDP is driven by fat, over consuming Americans and poor people increasing their standard of living. Having another billion poverty stricken world citizens is only going to increase despair and global misery rather than GDP (at least increase GDP by anything other than a small amount).
its Solow growth model... I don't think Bill is really coming up with anything new here:
http://en.wikipedia.org/wiki/Exogenous_growth_model
and yah from now on whenever I see a seeing eye toilet I'll think of Bill Gross (haha i don't think that is a good thing)
Bill's the man. But like many legends of the game, at this point he's selling his personal brand as much as his actual investment analysis. This is a point to keep in mind when reading him.
I will refer to the classic Paul Tudor Jones documentary (which I believe was posted by Edmundo some months back) where he and his cohort...using some heart rate monitor looking lawnmowputer predict the '87 crash...however, if you listen to their analysis it sounds a lot like the '08 crisis...my point?
Even the most perfect and truthful analysis is flawed long term, simply because we cannot predict how emotionally people will react to subsequent news. I agree with most of what BIll is saying, but as Anthony pointed out something like declining birth rates does not guarantee slowed growth.
As always...time will tell.
Bill Gross gives QE2, the American establishment, and turkeys, a royal beatdown (Originally Posted: 10/27/2010)
I posted this here because the Trader's forum is on an algo rush lately, so I figured it would get appreciated here. In my opinion, this may be one of Gross' best pieces yet. If you disagree with me, then post the link to whatever you think is better because I want to read it. The part about the "gossip" nature of American politics almost had me out of my seat cheering. Regardless of my beliefs, I am kind of surprised that Gross would take on the Fed like this, and use the names Charles Ponzi and Federal Reserve in the same sentence. Those are fighting words, and I love it.
http://www.pimco.com/Pages/RunTurkeyRun.aspx
I am surprised that Bill Gross said this. Having read the piece earlier today, I've had some time to digest it and I was thrown for a loop with him coming out and being so forthright about the sad state of affairs we're in.
That said, I think this is being published as a hedge made by Gross in expectation of QE2/Forclosuregate Bailouts/Total Default/Global Thermonuclear War/Tic Tac Toe, in that he is acknowledging the impending doom and accepting that unless he moves to all Cash (imagine liquidating a portfolio worth $750 Billion Dollars) it's not a matter of when, but how great will the losses be when he liquidates.
He is right, that we will not be seeing growth, but it's a matter of how much decline we will see. He's right about the importance of Wednesday, as the markets will price in how screwed we are and I'm glad he ackwoledges that we need to lay off the hypercaffinated QE2 assumptions in order to try and find natural growth and balance. I don't mind that he didn't bring up the discussion of truely reigning in the government and overhauling our system to work for the benefit of the people instead of the Pols because I know he wouldn't consider it on principle.
While I dislike Gross, this gives him a bit of humility. I do not doubt that Gross had insider information, nor do I doubt that he is carefully picking and chosing his battles in order to curry favor. I also believe that he is timing his trades to be concurrent with the Fed (buying MBS on margin before the Fed announces aquisition of those bonds, or making sure to be flush with select UST Cusips for the same purpose) and still looking to keep ahead of the curve. I think he is finally coming to accept what most other smart fund managers have been saying about the markets though. This won't change my opinion of the man, but it's a start when he finally takes a huge leap down the right path towards being a good fund manager and not just a greedy one.
I'll address what you wrote in parts:
More or less agree. We have started to see a few unlikely names start talking about how QE will always fail to touch structural unemployment, some are asset managers, others are public policymakers. However, it is becoming more likely that speculating on a total failure of the global economic establishment (I mean this in the peaceful sense) will generate a huge payout for those that are right. I wouldn't say Gross has gone from greedy to benevolent, but merely he recognizes the next big move will not be in bonds. Also, for the liquidating a 3/4 trillion dollar portfolio, Jeff Gundlach of DoubleLine (formerly at TCW) touched on this in an interview with Morningstar: http://www.morningstar.com/cover/videocenter.aspx?id=338987. While the idea of PIMCO or BlackRock needing to liquidate huge positions in a very short period of time seems a little too far off the deep end for me, other asset managers like pension funds are in such hot water that I think liquidation is a totally reasonable event.
I have never met the man, and I have not had enough time to look up the thoughts on buying certain bonds to frontrun Fed POMO purchases. However, it is no conspiracy that Gross LOVED the Public Private Investment Partnership. In part because it was partially his idea, which may have been because the he owned about $120 billion in MBS when the program started.
Need Help Understanding Bill Gross's Statement (Originally Posted: 01/04/2012)
Guys I was reading Gross's shareholder letter... I was having trouble understanding this concept of fat left tailed...
"This new duality – credit and zero-bound interest rate risk – is what characterizes our financial markets of 2012. It offers the fat-left-tailed possibility of unforeseen – delevering - or the fat-right-tailed possibility of central bank inflationary expansion."
Can someone explain this in layman's term? Like what curve is this talking about if it is talking about one? I just don't understand this.
He's talking about a normal curve with fat tails (i.e. that extreme, say 5 SDs from the mean, events are more likely to happen than a normal distribution would imply.) I assume he's talking about asset prices, which may decrease heavily in a deflationary environment and increase heavily in an inflationary environment. I suggest you read Nassim Taleb if you want to learn more (Black Swan)
I got it actually, I just don't understand the big picture. So rates are 0% now two big outcomes could occur, a large delevering.... or CB inflationary expansion
i don't understand the delevering outcome?
Tails
I haven't read his letter in detail yet (only skimmed it), but the sentence you quoted from it is slightly confusing.
What is this a distribution of (bond market returns?), economic growth? It's not clear from the statement. It seems like he is simply using the analogy of fat tailed distributions to discuss extreme events that he thinks are more likely now, rather than comparing right vs left tailed events (right being high return outcomes, left being high losses outcomes, both tails being fatter than they used to be). They way he puts it though, neither seems like a right tail event/outcome to me (i.e. highly positive in terms of bond market returns / economic growth).
I'll read the original letter. Maybe I'm losing context re the tails language.
The delevering outcome
It seems like he was talking about the outcome that banks & the financial system at large would contract money supply severely / shut down post-Lehman style. I don't know what could cause that. Maybe an unexpected reversal in central bank policy away from 0% interest rates (what could cause this?) or a major credit event at a large financial institution?
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