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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: Tue May 05, 2009 9:41 pm Post subject: |
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PIMCO's Bill Gross discusses the implications of rising populist sentiment and government intervention going forward:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/IO+May+09+Gross+2+2+4.htm
| Quote: | How does one invest during such a transition? Investors should recognize that this grassroots trend signals – most importantly – an increasing uncertainty of cash flows from financial assets. Not only will redistribution and reregulation lead to slower economic growth, but the financial flows from it will be haircutted and “burden shared” by stakeholders. In turn, the present value of those flows should reflect an increasing risk premium and a diminishing multiple of annual receipts. PIMCO’s Paul McCulley, famous for a catchy phrase or a light-bulb-generating truism, asked a group of clients the other day to compare FedEx and UPS to the U.S. Post Office, if it were a public corporation. “Which one would you pay more for?” he asked. If FedEx deserves a P/E of 12, wouldn’t the value of the Post Office be substantially less? His point, and mine as well, is that as wealth is redistributed, and the invisible private hand of Adam Smith begins to resemble more and more the public fist of government, then asset values should be negatively affected. First comes the haircutting and burden sharing, most recently evidenced by Chrysler and soon to be played out via the stress testing and equity dilution of government ownership of ailing banks. In those footsteps, however, will follow a slower rate of economic growth, not just in the U.S., but worldwide as heretofore libertarian capitalism is bridled, saddled and taught to trot instead of gallop over the investment plains.
This Outlook is not to bemoan this transition, but to recognize it. Slower growth can be a public good if it avoids the cataclysmic effects of double-digit unemployment, escalating foreclosures, and fear of financial insecurity. But the Obama cannon shot will have financial consequences. Do not be deceived by the euphoric sightings of “green shoots” and the claims for new bull markets in a multitude of asset classes. Stable and secure income is still the order of the day. Shaking hands with the new government is still the prescribed strategy, although it should be done at a senior level of the balance sheet. If the government indeed becomes your investment partner, you should keep the big Uncle in clear sight and without back turned. Risk will not likely be rewarded until the global economy stabilizes and the Obama rules of order are more clearly defined.
The ghost of Bernard Baruch still counsels that 2 + 2 = 4, but the repercussions of getting something for nothing should dominate the hopes that mankind will get off the deck and revert to a mean or median standard representative of outdated political and economic philosophies. Mohamed El-Erian’s and PIMCO’s “new normal” should trump green shoot exuberance for years to come. |
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rffrydr
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rffrydr
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| Posted: Sat Apr 04, 2009 9:59 pm Post subject: |
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More on PPIP numbers: this game can only be played by PIMCO and it's table of players. Not much here that resembles the early 20th-Century.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEDHFtFqc_ko
| Quote: | The plan may reward investors with 20 percent annual returns on “really ‘toxic’” mortgages bought at 45 cents on the dollar by allowing them to borrow six times their money with “non-recourse” government-backed debt, New York-based Credit Suisse Group AG analysts Carl Lantz and Dominic Konstam wrote in a March 27 report. That loan would be worth 15 cents to an investor seeking the same return who can’t use borrowed money.
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You wanna walk us through this one, Master H.?
| Quote: | | ......With recourse loans, the type of “toxic” mortgages identified by the Credit Suisse analysts, which have a hypothetical 40 percent annual default probability and only 10 percent expected recoveries, would be worth only 19.7 cents.... |
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HenryTo
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| Posted: Sat Apr 04, 2009 12:03 pm Post subject: |
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Latest April 2009 commentary from Bill Gross, titled "The Future of Investing":
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Investment+Outlook+April+2009+Evolution+or+Revolution+Bill+Gross.htm
| Quote: | | What then does commonsense tell us about future asset returns? Let’s revisit our previous conclusions on the developing environment for some clues. They include: delevering, deglobalization, reregulation leading to slow global growth, a heightened risk aversion, a distrust of conventional investment model portfolios, and a greater emphasis on surviving as opposed to thriving. If valid, then an investor or an investment committee would likely stress the bird in the hand – as opposed to the one in the bush; stable and secure income – as opposed to uncertain capital gains; a government-regulated utility model – as opposed to innovative yet risky venture capital investments. At current price levels, to cite one example, the current income from corporate bonds is higher and certainly more secure than the dividend income from stocks. A return to an era reminiscent of the first half of the 20th century is not unimaginable where stocks were viewed as subordinated income producers with yields exceeding their senior bond companions on the liability ladder. |
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HenryTo
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rffrydr
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HenryTo
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| Posted: Tue Feb 24, 2009 1:49 pm Post subject: |
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Latest March 2009 commentary from Bill Gross. Also contains his views on bank nationalization:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Investment+Outlook+Bill+Gross+March+2009+Hairy+Lips+Sink+Ships.htm
| Quote: | Question: What do you think about nationalizing the banks?
Answer: I think Roubini, Dodd and Greenspan haven’t thought this one through. The U.S. isn’t Sweden, and not just because our blondes aren’t au naturel. Their successful approach revolved around a handful of banks but we have 7,500, as well as many S&Ls and credit unions, which would have to be flushed into government hands. Regulators are overwhelmed as it is, and if you thought Lehman Brothers was a mistake, just standby and see what nationalizing Citi or BofA would do. Our banks remain at the heart of domestic/global financial transactions and daily clearing, while those Scandinavian banks were not. PIMCO would not dispute the need to further capitalize systemically important banks via convertible bonds held by the government, which unfortunately dilute shareholders’ interests. To go further, however, and “haircut” senior debt or even existing preferred stock similar to that issued via the TARP would create an instability policymakers should not want to risk. In turn, forcing creditors to take haircuts would undermine other financial sectors such as insurance companies and credit unions. The goal of future policy should be to recapitalize lending institutions while maintaining the basic infrastructure of credit markets. Outright nationalization and haircutting of creditors will do just the opposite. |
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HenryTo
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rffrydr
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| Posted: Sun Feb 01, 2009 11:36 pm Post subject: |
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TARP I was ridiculed as unworkable, unmanageable and unsupportive of lending--and in its violation of "market principles" unamerican. Direct capital injection to bank balance-sheets on the other hand was supposed to be none of the above--and leverage every dollar 10-1. Where was this support then? Where was the private support for the SuperSIV two years ago?
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HenryTo
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HenryTo
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| Posted: Thu Oct 30, 2008 11:07 pm Post subject: |
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Bill Gross' November commentary:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+Gross+November+2008+So+CQish.htm
| Quote: | The era now coming to an end is not a one-generational bull market that was born out of the ashes of double-digit inflation, and the end of governmental strangulation of private initiative in the early 1980s. It was much more, and much longer in duration.
The past era can best be described as a more than half-century build up in credit extension and levered finance. While home mortgages or buying a washing machine on “time” began in the early decades of the 20th century, the use and innovative application of credit really began when – well, when I was born. 1944 is as good a year as any to chronicle the beginning of our levered economy. I was a child of war, but also a child of a new global leadership confirmed at Bretton Woods and founded on faith in the U.S. dollar and the healing power that its printing could bring to the global community. |
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HenryTo
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HenryTo
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| Posted: Sun Sep 14, 2008 10:59 pm Post subject: |
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Gross got it right. The broker/dealer at Lehman will still be in operation - so we won't see downright liquidation starting tomorrow:
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Reuters: Lehman Brothers Holdings Inc says filing for Chapter 11 bankruptcy; says no subsidiaries will be included in filing 12:34am EDT |
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