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Thursday, September 4, 2008

Bill Gross: Big Bet, Big Fail?

I don’t like Bill Gross at all.

Pimco: Treasury needed to stop asset deflation: “To stop a sell-off of debt and other assets, the U.S. government will have to bring in new policies to open up the Treasury Department's balance sheet, said the manager of the world's biggest bond fund on Thursday.

"If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury," wrote Bill Gross, chief investment officer of Pacific Investment Management Co, or Pimco, in his September Investment Outlook.

"To ultimately stop this asset/debt deflation, a fresh and substantial new source of buying power is required," Gross wrote.

Across financial markets, liquidity is drying up and investors' risk appetites are "anorexic." Despite a recent resurgence in the stock market, asset prices are mostly falling, including those of commodities, Gross noted.

In this uncertain environment, private sector investors are increasingly reluctant to risk committing any more of their own capital, he added.”

You see, Bill Gross is balls deep into Fannie Mae (FNM) and Freddie Mac (FRE) agency debt. He bet big on a bailout that would make him whole. The rat-bastard will only make money if taxpayers get raped.

Pimco’s chief piles into mortgage debt: “Bill Gross, the manager of the world’s biggest bond fund, has switched gears to make a big bet on mortgage debt, almost tripling his holding of it to more than 60 per cent of the fund.

Mr Gross’s $130bn Pimco Total Return fund pulled sharply ahead of rivals in the past year after the manager predicted a housing downturn and sold out of housing-related securities and corporate bonds.

Mr Gross said his decision to raise exposure to mortgage debt in recent months was based on the US government’s implicit guarantee of Freddie Mac and Fannie Mae, the government-sponsored mortgage agencies.

“Government policy is moving to sanctify the status of the government-sponsored agencies. It became a question of which institutions would be sheltered by the government umbrella,” he said.

So far, the bet appears to be paying off.”

That was in May.

Haha. With spreads blowing out, Billy has to be feeling some serious pain right now. What if he was wrong and the government doesn’t make his positions whole? What if they bail out Fannie and Freddie but give all investors one hell of a haircut?

Maybe his “investment secrets” were nothing more than, “hang out with the right crowd and make sure they’ve got your back” and “if all else fails, get the taxpayer to bail you out of your underwater positions.”

Well, Billy has a big bet on. The big bet could result in a big FAIL.

For an amusing compilation of FAILS and EPIC FAILS click here.

For a sobering look at Fannie over at PaperEconomy: Ticking Time Bomb?: Fannie Mae Monthly Summary July 2008


Anonymous said...

perfect synopsis. Gross also begins the diatribe with a pep talk about Cramer. And I actually finished reading. That said Cramer is a first rate moron. An outmoded hedgy / instituitonal salesperson type. Cramer was whining on air about the Fed becuase his monkey frineds at GS and the like called him and used him a s useful idiot to plead their case. That wasnt him talking it was GS lackeys and the like telling Cramer what to say. Cramer like a good monkey responded in kind. Cramer still loves nat gas. The guy is a first rate moron. And the greatest irony is that he has made himself a mock populist. Did Bill gross stop to ask what exactly has the fed cutting rates done for mom and pop other than raise their mortgage rate? The two morons desserve each other.

Anonymous said...

I personally can stand Bill Gross either. He needs to learn to shut his mouth about everything but bonds. That said, PIMCO is counting on share and bondholders of FNM and FRE being wiped out, as well as the preferreds. I sat through the PIMCO MBS sales pitch/meeting. They are buying the MBS which are collateralized by the homes. If they aren't (or can't be) made whole there will be bigger problems for everyone. Fannie and Freddie are pretty much the only game in town right now.

Anonymous said...

Sorry should have read can't stand.

Anonymous said...

Ben, we are two peas in a pod. I think we can count on the government to do the wrong thing. Inflate or Die? Inflate or Default? Infate or Deflate? I think they pick inflate, hands down. I'm just looking to board the next bubble before it inflates. I've already got gold... water maybe? The PIO made a new low today.

Anonymous said...

BTW, I'm still holding my SRS and SKF but not happily. All I can figure is that those ETFs see a bailout in the future... or they are just consolidating. That said, I can see TOL going down in a ball of flames... dumbest CEO ever. That billion dollar cushion he keeps bragging about is a credit line! I bet TOL's bank wants that back...

Anonymous said...

PIMCO GROSS on CNBC threatening Paulson that he will not buy. I have never seen anything in my life like this. On national TV greenmail. This is illegal plain and simple.

Anonymous said...

Really wishing I held my SMN position past the 200 EMA right now . . .

A BAC short will have to suffice in the meantime.

-Mike J

p.s. yeah, Bill Gross is scummy.

Ben Bittrolff said...


"PIMCO GROSS on CNBC threatening Paulson that he will not buy. I have never seen anything in my life like this. On national TV greenmail. This is illegal plain and simple."

Greenmail defined for those who don't know...

Does this mean Billy's scared? Hehe.

Anonymous said...

He's the same guy who said before he was buying distressed GSE debt because he was convinced the implicit guarantee was really explicit. So he's willing to have taxpayers ante up so he doesn't have to do any due diligence. A real jerk.

escort barcelona said...

This won't work in reality, that is what I suppose.