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PIMCO's Bill Gross Commentary |
HenryTo
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 Posted: Wed Apr 04, 2007 12:56 pm Post subject: PIMCO's Bill Gross Commentary |
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April 2007 commentary from Bill Gross:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+April+2007.htm
Along the lines of what I wrote in our weekend commentary. The danger is in overregulation and tighter lending standards for months/years to come, not the current/potential losses from higher resets, etc.
| Quote: | | It will not be loan losses that threaten future economic growth, however, but the tightening of credit conditions that are in part a result of those losses ... Bulls and bears argue over websites as to the percentage of all lending that subprime and alternative mortgage loans provide but while important, the argument obscures the critical conclusion that tighter lending standards and increased regulation will change the housing outlook for some years to come. As past marginal buyers are forced to sell their home to prevent foreclosures, so too will future marginal buyers be restricted from buying them. |
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PIMCO's Bill Gross Commentary Replies |
HenryTo
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| Posted: Thu Sep 04, 2008 5:49 pm Post subject: |
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Latest monthly commentary from Gross. Says the time to act decisively is now:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/Investment+Outlook+Bill+Gross+Sept+2008+Bull+Market.htm
| Quote: | | This rarely observed systematic debt liquidation is what confronts the U.S. and perhaps even the global financial system at the current time. Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami. Central bankers, of course, adopting the cloak and demeanor of firefighters or perhaps lifeguards, have been hard at work over the past 12 months to contain the damage. And the private market, in its attempt to anticipate a bear market bottom and snap up “bargains,” has been constructive as well. Over $400 billion in bank- and finance-related capital has been raised during the past year, a decent amount of it, by the way, having been bought by yours truly and my associates at PIMCO. Too bad for us and for everyone else who bought too soon. There are few of these deals now priced at par or above, which is bondspeak for “they are all underwater.” We, as well as our SWF and central bank counterparts, are reluctant to make additional commitments. |
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HenryTo
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HenryTo
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HenryTo
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rffrydr
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| Posted: Tue Apr 01, 2008 7:13 am Post subject: |
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Investment grade corporates selling:
http://www.bloomberg.com/apps/news?pid=20601087&sid=at9yBsJsTjns&refer=home
It's not just a cycle play. Note the last line:
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``In this environment, all things being equal, a company would probably just as soon issue as long as it can in the bond market, just because of all the uncertainty,'' said Wilmer Stith, who manages about $3 billion in fixed-income assets for MTB Investment Advisors in Baltimore. ``It's better to have a bird in the hand.'' |
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rffrydr
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| Posted: Tue Apr 01, 2008 7:09 am Post subject: |
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| Quote: | | As well, because of the retreat of securitization, risk spreads – from corporate bonds to equities, to commercial and residential real estate – will settle at permanently higher levels. The U.S. asset-based economy will morph into a more expensive hybrid that will reign supreme for years to come. |
The weight of the EEM has been lifted off his shoulders... Other than that, I'm not sure what he's talking about??? Hybrid is what defines every other nation's strcture. Inflation? Ours is better??? --Or, money come back to its rightful home.
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HenryTo
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rffrydr
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| Posted: Fri Mar 07, 2008 1:21 pm Post subject: |
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Bill Gross on CNBC calls for "Operation Twist II"--from the sixties, taking mortgages for treasuries. --And punching the gas pedal.
How times have turned for this man since Brazilian bonds almost got him.
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rffrydr
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lmrhoades
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| Posted: Tue Feb 26, 2008 10:36 am Post subject: |
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Henry...
Would you suggest buying in leverage loan portfolio such as hflax fund or a cef such as nsl?
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HenryTo
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| Posted: Tue Feb 26, 2008 10:23 am Post subject: |
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Bill Gross' latest monthly commentary. Rehashes some old points - but also discuss what sounds enticing (given higher inflation) at the end of his commentary:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+March+2008.htm
| Quote: | This leads me to #3 on my list of action plans. What should an investor do – desperately trying to avoid the Old Maids, yet trapped with good Treasury cards at yields inappropriately low in a mildly inflationary future environment? The answer lies in managing a transition to riskier assets while being acutely aware, as my CIO partner Mohamed El-Erian is quick to point out, that such a transition will be characterized by technical purges of Old Maid and even higher quality assets that in many cases produce price levels significantly below what might at first seem reasonable. Minsky moments – the unwinding of levered assets – produce as many surprises on the downside as do $5 million dollar homes in Silicon Valley and NASDAQ 5,000 point stocks on the upside. Patience and cognizance of flows, El-Erian counsels, are as critical to the equation as is the recognition of the Old Maids in the first place.
Still, we would both agree that value is returning to many parts of the bond market. If an investor requires 5%+ yields to compensate for future inflation, then they can increasingly be found in authentic AAA assets – not disguised Old Maids. There’s not a hint of plastic surgery in agency-backed FNMA and FHLMC mortgages at 5¾%, although their actual ages (average lives) may be somewhat in doubt. Similarly, SBA government-guaranteed loans at LIBOR+ 125 basis point yields are beginning to entice, as are some of those bank loans when priced in the high 80s as opposed to 95 cents on the dollar. If capitalism is a going enterprise – and we think it is – then investors will eventually return to play similar, perhaps more conservative games – much as they have in the past. And if Washington gets off its high “moral hazard” horse and moves to support housing prices, investors will return in a rush. PIMCO wants to sit at this more attractive return table – to provide an attractive return on your money (no matter what the asset class) as well as a return of your money. No Old Maids. No silicone AAA ratings. And ladies – no crotchety old bachelors either. The game, as well as the name of the game, is changing. It’s no country for Old Maids anymore. |
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HenryTo
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HenryTo
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rffrydr
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HenryTo
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| Posted: Wed Jan 30, 2008 4:41 pm Post subject: |
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In other news, the head of the ISDA sounds off on Gross' $250 billion projection in losses related to CDS:
http://www.ft.com/cms/s/0/80f0e842-ce0c-11dc-9e4e-000077b07658.html
| Quote: | Focus on the net exposure of these transactions, many of which hedge or offset one another. A recent Fitch Ratings survey estimates net exposure at less than $1,000bn. Factor in a probability of default of 2 per cent and a 25 per cent recovery rate and protection sellers would have to settle an aggregate $15bn of losses. None of these amounts would be "lost" to the system; a credit derivative simply transfers a potential gain/loss from one party to another. Clearly, while $15bn is not trivial, it is a small fraction of aggregate write-offs to date on loans and securities; and less than a 10th of Mr Gross's suggestion.
And our figures are conservative: we use a slightly higher ($50,000bn) figure for the total reference amounts; we round up the net exposure figure; we use a higher default rate than the 1.25 per cent used elsewhere; and our projected recovery rate is much lower than the 50 per cent used by Mr Gross.
Also, defaults in a downturn are usually considered to eliminate a much higher proportion of lower-rated companies, whereas surveys show that only about one-third of credit derivatives are written on subinvestment grade credit. So the impact of default would not necessarily be the same for credit derivatives as for credit markets as a whole. And such trading losses would be unlikely to hit simultaneously.
Even if default rates prove higher than those used here, settlement flows in credit derivatives would likely be much lower than in Mr Gross's assumptions. This is not just theory. Settlement has occurred on this basis for several "credit events" where participants have organised net settlement through ISDA, with wide-ranging support, including from major bond funds. |
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