FT Alphaville would like to recall a post series entitled “Wunderbund,” which purported to follow the 10 year German sovereign benchmark bond all the way to a yield of zero.
We come out with our hands up. This was clearly the wrong call.
Yes, yes, we should just look away, Bill Gross wants your clicks. But…
It would be pretentious to say that I resembled Honey in any way, but nonetheless she was the puppy I chose. Honey turned out to be a little bit of a tramp, so maybe there’s the connection. Back in the freewheeling ‘80s when society had not even contemplated poop scooping and blue pick-up bags, Honey would roam the neighborhood, depositing wherever she pleased, but bringing things back home in return.
Everyone’s favourite oddball bond manager is back with a new investment outlook. The theme is what nursery rhymes can tell us about monetary policy, or something, but the opening is worth reading by itself:
Punch and Judy fought for a pie.
Punch gave Judy a sock in the eye.
Said Punch to Judy, “Would you like any more?”
Said Judy to Punch, “No my eye is too sore.”
– Mother Goose nursery rhyme Read more
“Why, all the better to see and hear you coming with my dear!”
Little Red Riding Hood is the cautionary tale of what happens to the naive and gullible if they trust or listen to strangers. Specifically, it’s the story of a little girl who gives away too much information to the Big Bad Wolf who then uses it to create a situation where he can much more easily eat her up for lunch — by masquerading as her loving grandmother — out of sight of the regulatory oversight of the local woodcutter enforcement committee.
Or, as the Charles Perrault version of the story goes:
As she was going through the wood, she met with a wolf, who had a very great mind to eat her up, but he dared not, because of some woodcutters working nearby in the forest. He asked her where she was going. The poor child, who did not know that it was dangerous to stay and talk to a wolf, said to him, “I am going to see my grandmother and carry her a cake and a little pot of butter from my mother.”
Dancing, or better yet as the beginning of my Investment Outlook suggests, being asked to dance, seems to have become an important part of my life over the past month or so. Having first been asked by my wonderful wife, Sue, and now by Dick Weil and Janus from a business standpoint, I write to you today from my desk in a new Janus office in Newport Beach, California.
So you thought Pimco was under scrutiny before. The departure of Bill Gross — co-founder, monarch, guru, talisman — provides a case study into one of the questions at the heart of asset management. Is it the person or the process?
It is more than a theoretical question. The immediate reaction to Friday’s news from old industry hands, beyond “blimey!”, is that any organisation other than Pimco would be going straight onto the watchlist for redemption of assets by the investment consultants who direct so much institutional investor money.
Pimco, though, is a machine. Read more
Bloomberg Businessweek has the latest big interview with the king of Pimco. Click for the low down on special-K served Mercedes-style, the big man’s seven screens, and expansion as a dairy-based process:
First there were the tweets (since deleted) that appeared to get China’s interest in Treasuries the wrong way round. Now Bill Gross has started to see the hand of his former co-chief investment officer everywhere he turns.
Reuters reports that Pimco’s main man told them he had “evidence” that Mohamed El-Erian was behind the WSJ’s brutal account of the rift at the top of the bond house, but when they asked to se it? Well: Read more
A new year is a new country, so far as the investment prognostication world is concerned. What will people do with their clean slates, we wonder?
Buy equities is a strong contender. It appears to be what retail investors finally did last year after years of revealing their preference for bonds, and they aren’t done yet. If you don’t believe us, well, we have charts… Read more
The Telegraph’s Willard Foxton notes the online black market portal Silk Road has been experiencing some serious outages the last few days. The problems may be linked to a hacker and extortion attempt. The portal, rather ironically for an illicit website, is now offering a reward for information leading to the arrest and conviction of whoever is behind the attempt.
Though Silk Road has been experiencing other problems too, not least the hyperdeflationary effects of the Bitcoin rally: Read more
…the UK is a must to avoid. Its Gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks for bond investors. In addition, its interest rates are already artificially influenced by accounting standards that at one point last year produced long-term real interest rates of 1/2 % and lower.
Pimco’s Total Return Fund, managed by Bill Gross, now holds Treasuries to the greatest extent since July 2010, departing from sharp cuts to its holdings in 2011, Bloomberg reports. Holdings of US government debt rose to 38 per cent last month from 30 per cent in December. The fund gained 2.13 per cent in January, beating almost all of its peers, according to Bloomberg data. Gross nevertheless faces rising doubts that the $250bn Total Return Fund has become too big to manage and too reliant on derivatives, says Reuters in a special report.
Pimco’s Bill Gross has increased his holdings of Treasuries to the highest level since July 2010, a year after banishing US government debt from the world’s biggest bond fund, reports Bloomberg. Mr Gross boosted the proportion of US government and Treasury debt in Pimco’s $250.5bn Total Return Fund in January to 38 percent from 30 per cent in December, according to a report placed on the company’s website. He raised mortgages to 50 per cent, the highest since June 2009, from 48 per cent in December.
Presented without comment:
Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember
Virginia Woolf, “The Hours”
Pimco’s flagship bond fund, the world’s largest, experienced annual outflows for the first time in its history in 2011, according to research group Morningstar. The FT reports the $240bn Total Return Fund run by Bill Gross had attracted fresh investor capital every year since its inception in 1987, and it success has played a central role in the growth of the asset manager based in Newport Beach, California. However, Mr Gross ranked behind more than two-thirds of his peers last year, following a high-profile bet that US government debt would fall in value. Investors pulled $1.4bn from the Total Return Fund in December, taking outflows for the year to $5bn, according to Morningstar. Since November 2010, Pimco has seen a net $13.7bn pulled from its flagship fund.
Bill Gross has made a big U-turn in the investment strategy of his $242bn fund after a high-profile bearish call on the US Treasury market backfired, the FT says. After largely exiting US bond markets in February on fears of a spike in inflation, the Pimco bond manager began reversing course in the summer. More recently, he has placed a big bet on lower long-term interest rates that radically shifts the composition of his fund. he move, revealed by Pimco this week, comes after a humbling year for a fund manager often feted for his investing acumen and influence on the bond market. His flagship fund has produced a return of just 1.9 per cent for its investors so far this year, leaving him ranked 552 out of his 604 peers according to Lipper, a research house.
Bill Gross has made a big U-turn in the investment strategy of his $242bn fund after a high-profile bearish call on the US Treasury market backfired, triggering deep underformance by the world’s largest bond fund, the FT reports. After largely exiting the US Treasury bond market in February on fears of a spike in inflation, the Pimco bond manager has reversed course, placing a big bet on lower long-term interest rates that radically shifts the composition of his fund. The move, revealed by Pimco this week, comes after a humbling year for a fund manager often feted for his investing acumen and influence on the bond market. His flagship fund has produced a return of just 1.9 per cent for its investors so far this year, leaving him ranked 552 out of his 604 peers according to Lipper, a research house. By comparison, the Barclays US aggregate bond index has returned investors 6.7 per cent year to date.
Bill Gross, manager of the world’s largest bond fund for Pimco, has admitted that it was a mistake to bet so heavily against the price of US government debt in an FT interview. Gross emptied his $244bn Total Return Fund of US government-related securities earlier this year in a high-profile call that has backfired as the bond market has rallied. As of Monday, Pimco’s flagship fund ranked 501th out of 589 bond funds in its category. See also FT Alphaville.
Pimco has used this week’s fall in Italian bond prices to load up on the country’s debt from an underweight position, according to the fund’s head of fixed income portfolio management, says Reuters. The sell-off underrated Italy’s institutional strength and was exaggerated, Pimco said. Meanwhile the Total Return fund managed by Bill Gross upped holdings in US “government-related securities” in June for a second consecutive month, moving its overall position back to zero, says the FT. Gross had argued before the end of QE2 that yields were likely to rise.
Has Bill Gross ditched his “long-short-long position” on US Treasuries?
Pimco on Tuesday published the latest holdings of its flagship Total Return Fund. The statistics are accurate as of 30 June. They show that Gross has increased TRF holdings of Treasuries to 8 per cent from the 5 per cent listed at the end of May. Read more
Apologies for the public school levels of surname chicanery in the title but a couple of big hitters have weighed in before the Fed Chairman’s special appearance on US Markets Live on Wednesday.
Richard Koo, chief economist at Nomura Research Institute and analyst-in-chief of “balance sheet recessions“, writes in his latest note that the Fed’s lack of options today is reminiscent of the BoJ’s predicament a decade ago. Read more
You may remember Bill Gross’ sage advice to “buy cheap bonds” and his amphibious explainer:
All right fellow frogs, so we’re being repressed and shortchanged in order to allow Uncle Sam to balance its books. Whatta we gonna do about it? “Frogs of the world unite,” as Lenin might have said, and so here’s where I harken back to Mark Twain and my second lesser-told frog story. There was this other frog who instead of being tossed into a pot of hot water was left to cool its heels in a pitcher of cold milk. Unable to jump out, he churned and churned those frog legs until eventually the milk turned into butter and the hardened butter allowed him the platform to leap to froggy freedom! Well, let’s get churnin’, fellow frogs.