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?

 

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.

 
Martinghoul:

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.

Can you post what he actually says vs. the other guys? You and I are in agreement that the curve flattens significantly when rates rise. But, what is JP Morgan saying? (I have not read it) Long duration would seem to be a better place to be if you think the Fed is going to be slower to raise rates than others. This is implying that PIMCO thinks rates will be slower to rise and Bill wants to be shorter duration (5-7 years) than JP Morgan/Goldman (10-20 years). I haven't read anything other than what's posted here on WSO, so it's likely that the OP misrepresented what one or more of these firms is saying.

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.

 

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.

 

[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.

The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee WSO is not your personal search function.
 

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.

looking for that pick-me-up to power through an all-nighter?
 

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.

"You stop being an asshole when it sucks to be you." -IlliniProgrammer "Your grammar made me wish I'd been aborted." -happypantsmcgee
 

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.

 
Tar Heel Blue:
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

"You stop being an asshole when it sucks to be you." -IlliniProgrammer "Your grammar made me wish I'd been aborted." -happypantsmcgee
 

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.

Men are so simple and so much inclined to obey immediate needs that a deceiver will never lack victims for his deceptions. -Niccolo Machiavelli
 
timetogtfo:
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.

That's great, but Singapore doesn't produce its own food. Russia is already limiting food exports, and the US may do the same if there is a genuine crisis. Do you really want to be in Singapore during a global famine? Bear in mind that expatriation is permanent and you are generally not allowed back into the country.

The problem with tax havens is that they're not very good havens on other fronts when a crisis hits.

 
timetogtfo:
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.

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.

 
timetogtfo:
Also China is definitely not a net importer of food, you are wrong.
Not according to the USDA:

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.

 
TheKing:
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).

 

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.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

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...

 
alexpasch:
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.

 
ANT:
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.

 
ANT:
We needed the bailout. Not saying that all of the bailout was right, but the financial sector collapsing would fuck everyone.
I can say from personal experience that things would have been all right without a bailout had the fed merely loosened up the money supply in the wake of the crash.
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.
Well, we have to cut money the poor are getting, but if we do that, isn't the balanced thing to do to be hiking taxes?
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.
Absolutely. But we're talking about hiking taxes. A return to the Clinton Tax schedule would raise taxes on the poor and the rich. Combine that with spending cuts and if anything, the poor are getting double the pain of the rich. I'm not saying the rich should suffer more or less from budget cuts and tax hikes, but I do think that it sends a good message if everyone shares the suffering during a budget crunch.
 

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.

 
ANT:
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

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 

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?

Sent from my iPhone
 

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.

 

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.

 

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'

This to all my hatin' folks seeing me getting guac right now..
 

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.

 
ArcherVice:

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.

 

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.

CNBC sucks "This financial crisis is worse than a divorce. I've lost all my money, but the wife is still here." - Client after getting blown up
 

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.

 

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.

 

I love that TheKing gets shit for posting something that would have otherwise garnered complete support from WSO.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

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.

 

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.

 
Best Response

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.

 
rothyman:
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+

 
rothyman:
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.

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.

 
rothyman:
...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.

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

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 
TheKing:
0:28 — Fink: "I'm actually very happy with Occupy Wall Street because I think that actually for the first time in 3 years we may have fringe element symmetry...The Tea Party shaped the 2010 elections in a very big way and frankly I was personally surprised that we didn't have a left wing element...I'm not saying I agree with one side or the other, I agree with a lot of fringe elements and what they're trying to say."

ANT. This^

Thanks for the link TheKing.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 

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.

 
ANT:
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.

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.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 
TheKing:
cphbravo with a nice strawman argument.

Wow, TheKing making accusations and/or calling names. Nice to see some new tactics from you. #sarcasm

Regards

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 

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?

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

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.

 
GoodBread:
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 American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

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

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

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.

looking for that pick-me-up to power through an all-nighter?
 

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.

 
monkeysama:
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.

 

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.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

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.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 
GoodBread:
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.

********************************* “The American father is never seen in London. He passes his life entirely in Wall Street and communicates with his family once a month by means of a telegram in cipher.” - Oscar Wilde
 

His douchebaggery knows no bounds....

From the filing:

  1. "Mr. Gross's ongoing success at PIMCO proved to be his undoing. In the minds of certain younger executives at PIMCO, Mr. Gross's ongoing presence at the company checked their own financial and career ambitions"

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.

 

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.

 
jankynoname:

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.

 
("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...

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.

Winners bring a bigger bag than you do. I have a degree in meritocracy.
 

I think his point is valid, scary too. Our generation is in for some pain!

"One should recognize reality even when one doesn't like it, indeed, especially when one doesn't like it." - Charlie Munger
 

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).

 

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.

 

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.

There’s another important day next week and it rather coincidentally occurs on Wednesday – the day after Election Day – when either the Donkeys or the Elephants will be celebrating a return to power and the continuation of partisan bickering no matter who is in charge. Wednesday is the day when the Fed will announce a renewed commitment to Quantitative Easing – a polite form disguise for “writing checks.” The market will be interested in the amount (perhaps as much as an initial $500 billion) as well as the targeted objective (perhaps a muddied version of “2% inflation or bust!”). The announcement, however, has been well telegraphed and the market’s reaction is likely to be subdued. More important will be the answer to the long-term question of “will it work?” and perhaps its associated twin “will it create a bond market bubble?”

Whatever the conclusion, not only investors, but the American people should recognize that Wednesday, even more than Tuesday, represents a critical inflection point in determining our future prosperity. Of course we’ve tried it before, most recently in the aftermath of the Lehman crisis, during which the Fed wrote $1.5 trillion or so in “checks” to purchase Agency mortgages and a smattering of Treasuries. It might seem a tad dramatic then, to label QEII as “critical,” sort of like those airport hucksters, I suppose, that sold whale blubber for a living. But two years ago, there was the implicit assumption that the U.S. and its associated G-7 economies needed just an espresso or perhaps an Adderall or two to get back to normal. Normal just hasn’t happened yet, and economic historians such as Kenneth Rogoff and Carmen Reinhart have since alerted us that countries in the throes of delevering can take many, not several, years to return to a steady state.

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:

Frieds:
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.

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.

Frieds:
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 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.

 

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?

 

Repellendus voluptates odio cupiditate qui molestiae labore. Quis possimus numquam possimus ullam. Porro ut sed sunt deleniti ratione enim molestiae numquam.

Tenetur sed laborum veritatis. Occaecati officiis reiciendis quia alias eum ut. Dolore consectetur exercitationem et eveniet sunt molestias. Ipsa velit occaecati nemo ipsum accusantium harum. Cumque corporis nobis ut alias quia eos dolorem.

 

Aspernatur ducimus sed laborum. Quas alias non dignissimos earum eveniet quis aspernatur. Consequatur optio corporis neque ut. Iste aut minima sint debitis ut.

Consequatur corrupti autem iste atque enim. Cupiditate dicta vel reprehenderit nemo labore ipsum quae. Iusto alias ut ut dolores quis fugit consectetur.

Et voluptates sed aut dolores. Tempora eius est omnis blanditiis.

Eum aut perferendis et quidem velit sed ut quia. Accusamus natus quibusdam cumque repudiandae aut id officiis. Soluta facere eos laudantium consequatur.

 

Cum eum temporibus et rerum enim cumque nihil. Aut sequi sint distinctio eum dolorum sequi ea. Voluptatum exercitationem quasi et id enim.

Nemo velit repellendus voluptatem fuga quo molestias. Inventore asperiores sunt consectetur. Enim quia quaerat quo accusantium. Sed eos provident corporis nisi. Illum molestias cupiditate similique voluptates qui sint. Velit aut debitis quis vel beatae. Quaerat voluptas aut culpa.

Dicta consequatur doloremque corporis sapiente iusto molestias aut sunt. Sed nesciunt architecto eveniet nulla odio sit nam. Dolorem quis ipsum consequatur ea. A in molestiae ducimus ex aliquam repellendus. Aut nihil error exercitationem et deserunt quia. Ut omnis quia culpa nam.

Qui dolor sunt et blanditiis quia sint. Aperiam quae id voluptas voluptatem voluptatem tempora. Et laborum officia pariatur magni.

 

Quisquam eum sed in voluptatem blanditiis iure. Aspernatur earum qui aut similique. Ratione enim impedit libero accusantium ea deserunt.

Voluptas repellendus corrupti fugit debitis distinctio et dolor. Sapiente maiores quasi ipsa nostrum. Neque ad ut aut.

Accusantium ut repellat amet qui non nihil. Quia facilis quod suscipit sequi impedit non. Soluta fuga quod ut sed facilis occaecati.

Maternity is a matter of fact, paternity is a matter of opinion.
 

Veniam maxime facilis et quae dolor. Enim consequatur soluta dignissimos possimus consequatur in. Quia doloribus nihil accusamus qui laudantium ducimus.

Qui minima sunt voluptatum. Est deleniti atque quia enim nobis atque. Aut perspiciatis tenetur quisquam harum quis. Modi maiores qui perferendis repudiandae. Reprehenderit reprehenderit et expedita iste fuga debitis. Officia omnis nostrum est cumque.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
dosk17's picture
dosk17
98.9
6
CompBanker's picture
CompBanker
98.9
7
kanon's picture
kanon
98.9
8
GameTheory's picture
GameTheory
98.9
9
DrApeman's picture
DrApeman
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”