Bill Gross Continues Blasting "The Bernank's" Ponzi Policies, Self-Flagellates "Newport Beach" Multimillionaires

Tyler Durden's picture

Yet another odd letter comes from under Bill Gross' pen, in which he continues to bash "The Ben Bernank's" Ponzi policies ("policymakers at the Fed write trillions of dollars’ worth of checks under the guise of quantitative easing, a policy which takes Charles Ponzi one step further by purchasing the government’s own paper in a last gasp effort to support asset prices") while making it all too clear that the only beneficiaries are "Newport Beach mega-millionaires." Has Warren Buffet-style self-flagellation become trendy among the billionaire jet set? Lastly, Gross makes it clear that the American economy is doomed in the long-run absent a "policy revolution" in DC: "Unless developed economies learn to compete the old-fashioned way – by making more goods and making them better – the smart money will continue to move offshore to Asia, Brazil and other developing economies, both in asset and in currency space. The United States in short, needs to make things not paper, but that is not likely unless we see a policy revolution in Washington DC. In the meantime, our unemployed will continue to fill out forms and stand in line." And the Newport-beach mega-millionaires will continue to front-run the Fed. Nothing ever changes indeed.

From Bill Gross' Monthly Investment Outlook (who has been buying MBS on margin like there is no tomorrow).


Well we’re living here in Allentown
And they’re closing all the factories down
Out in Bethlehem they’re killing time
Filling out forms
Standing in line
And we’re living here in Allentown

       – Billy Joel, 1982

We’re all Allentowners now. Granted, 90% of the
workforce is still reporting for work on time, but our standard of
living, our confidence in the future – we’re standing in line in
Allentown. Lost in the policy debate surrounding the elections and the
subsequent demonisation of the Federal Reserve’s Quantitative Easing
(“QE2”) policies has been any recognition of why we no longer live on Ronald Reagan’s shining hill or how we might possibly reclaim higher ground. There are two fundamental explanations:

1) The global economy is suffering from a lack of aggregate demand.
In simple English that means that consumers are not buying enough
things and that companies are not hiring enough people because of it.
Growth slows down, especially in developed as opposed to developing
countries, and the steel mills of Allentown, USA and Sheffield, England
close down.

This shortfall of global demand is a nearly
impossible concept to grasp amongst politicians and their citizenry.
Don’t people always want to buy more things and isn’t demand
theoretically insatiable? They do, and it is. Yet economic growth is a
delicate dance between production and finance and when a nation’s or a
family’s credit card gets maxed out, then demand/spending slows
measurably. We are witnessing these commonsensical repercussions across
the entire continent of Europe today and to a lesser extent in the
United States.

Developing nations and
their consumers want to buy things too. And while their economies are
growing fast, their overall size is not yet sufficient to pull along the
economies of Europe, Japan and the US. Their financial systems are
still maturing and reminiscent of a spindly-legged baby giraffe, having
lots of upward potential, but still striving for balance after a series
of missteps, the most recent of which was the trio of the 1997–98 Asian
crisis, the 1998 Russian default and the 2001 Argentine default. And so
their policies are oriented towards export to debt-laden developed
nations instead of internal consumption, leaving a gaping hole in global aggregate
demand. China is a locomotive to be sure, but it cannot pull the global
economy uphill on the basis of mercantilistic exports alone. It needs
to develop many more of its own shopping malls and that will take years,
if not decades.

2) With insufficient demand, nations compete furiously for their share of the diminishing global growth pie.
All look to borrow growth from somewhere else. Nearly a half century
ago, the undisputed champion of global growth was the United States – it
held all the cards: an unscathed post-WWII industrial base, an
acknowledged Bretton Woods reserve currency and an educated workforce
able to out-innovate any and all competitors. No wonder our policies
encouraged open markets and free trade policies that would only feed the
United States hegemon. At some point in the 1970s to 1980s, however,
the rest of the world began to catch up. Japan produced better cars than
Detroit, the Iron Curtain fell, and the rise of China was soon to rock
American/developed economies out of their presumption that the world was
their export oyster. Billy Joel’s Allentown was transformed from an
iron and coke/chromium steel behemoth into an unemployment centre,
filling out forms – standing in line.

And so the United States and its developed
economy counterparts face an unfamiliar crisis of unrecognised
dimensions and potentially endless proportions. Politicians and
respective electorates focus on taxes or healthcare when the ultimate
demon is a lack of global demand and the international competitiveness
to thrive. The solution for more jobs is seen as a simple quick step of
extending the Bush tax cuts or incenting small businesses to hire
additional workers, or in the case of Euroland, shoring up government
balance sheets with emergency funding. It is not. These policies only
temporarily bolster consumption while failing to address the
fundamental problem of developed economies: Job growth is moving
inexorably to developing economies because they are more competitive
Free trade and open competition, like a stretched rubber band, have
snapped the US and many of its Euroland counterparts in the face. By
many estimates, Chinese labour works for 10% or less than its American
counterparts. In addition, and importantly, it is able to innovate as
quickly or replicate what we do. Jobs, in other words, can never come
back to the level or the prosperity reminiscent of 1960s’ Allentown,
Pennsylvania until the playing field is levelled.

This phrase of a “level playing field” opens up endless possibilities. If, in fact, the solution to how
we can reclaim the vision of Ronald Reagan’s “shining hill” and the
Allentown of decades past is to “level the playing field,” there are
obviously a number of ways to do it. The constructive way is to stop
making paper and start making things. Replace subprimes, and yes,
Treasury bonds with American cars, steel, iPads, airplanes, corn –
whatever the world wants that we can make better and/or cheaper. Learn
how to compete again. Investments in infrastructure and 21st century education and research, as opposed to 20th
century education are mandatory, as is a withdrawal from
resource-draining foreign wars. It will be a tough way back, but it can
be done with sacrifice and appropriate public policies that encourage
innovation, education and national reconstruction, as opposed to Wall
Street finance and Main Street consumption.

The second route to the level playing field
involves political and financial chicanery: trade and immigration
barriers, currency devaluation and military domination of foreign
oil-producing nations. It is by far the less preferable route, but
unfortunately the one that is easier and, therefore, most politically
feasible. Politicians do not get elected on the basis of “sacrifice.”
They get elected by pointing to foreign demons, be they in the Middle
East or in Asia. The Chinese yuan is a far easier target than the
American workers earning ten times their Chinese counterparts and
producing an inferior product to boot. Politicians also get elected by
promising to keep taxes low, even for the rich, with the argument that
small business owners cannot afford the increase. The real beneficiaries
however, are the mega-millionaires of Wall Street and Newport Beach.
And yes, policymakers at the Fed write trillions of dollars’ worth of
checks under the guise of quantitative easing, a policy which takes
Charles Ponzi one step further by purchasing the government’s own paper
in a last gasp effort to support asset prices.

Faced with these two decidedly different routes
to “level the playing field” it seems obvious that the United States is
opting for “Easy Street” as opposed to “Buckle Down Road.” Granted,
“The Ben Bernank” as a YouTube cartoon rather hilariously labelled him,
has for several months importuned Congress and the Executive Branch to
institute substantive reforms, while he attempts to keep the patient
alive via non-conventional monetary policy.
But very few others are
willing to extract their heads from the sand. The President’s debt
commission with its insistence on low personal and corporate income tax
rates and a mere 15 cent increase in the gasoline tax was one example.
The Republicans’ reluctance to advance detailed ideas for budget
balancing is another. And the Democrats’ two-year focus on the biggest
entitlement program since Social Security – healthcare – as opposed to
fundamental reforms to counter our lack of global competitiveness – is
perhaps the most grievous example of lost opportunity. Unlike the United
Kingdom, where Prime Minister Cameron has championed fiscal
conservatism, or even Euroland, which is being forced in the direction
of Angela Merkel’s Germanic work ethic, the United States seems to
acknowledge no bounds to what it can spend to bolster consumption or how
much it can print to support its asset markets. We will more than likely continue to “level the playing field” via currency
devaluation and an increasing emphasis on trade barriers and
immigration, as opposed to constructive policies to make this country
more competitive in the global marketplace

If so, investors should recognise that an
emphasis on currency depreciation and trade restrictions are counter to
their own interests. Not only would their dollar-denominated investments
lose purchasing power over time from a global perspective, but they
would do so also via a policy of near 0% interest rates, which are
confiscatory in real terms when accompanied by positive and eventually
accelerating inflation. In addition, although corporate profits are in
many cases broadly diversified across
national borders,
there should be little doubt that the objective of tariffs and trade
barriers is to advantage domestic labour as opposed to domestic capital;
profits, therefore will ultimately not benefit.

Unless developed economies learn to compete the
old-fashioned way – by making more goods and making them better – the
smart money will continue to move offshore to Asia, Brazil and other
developing economies, both in asset and in currency space. The United States in short, needs to make things not paper,
but that is not likely unless we see a policy revolution in Washington
DC. In the meantime, our unemployed will continue to fill out forms and
stand in line. We’re living here in Allentown.

William H. Gross
Managing Director

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ziggy59's picture

yes..UTP..Universal Toilet Paper!!  one sheet is good for all a$$es..hooo hooo.. Cling-ons beware..



Dollar Bill Hiccup's picture

Along that line of thought, I would improve on Gross's choice of words by replacing "head in the sand" with "head up the a--".

I think it is more accurate.

Cognitive Dissonance's picture

Will someone please stuff a sock in this guy's mouth? Or whatever else you might have available on short notice.

RSDallas's picture

What?  Do you argue that the United States has become non competitive at home?  Do you argue that the American corporate response to staying competitive is too move their operations offshore rather than investing in their operations in the US?  Do you argue the point that a huge percentage of our citizenry would rather get (and ask for) a free hand out from our government versus getting off their asses and working?  Do you argue that the current regimes health care bill is nothing short of another socialist scam?  Do you argue the fact that our society has decided to produce wall street MBA versus an entrepreneur who could build a factory to produce goods that can be consumed right here in America and abroad?  Do you argue the fact that America has developed into a Nation that preferrs to create barriers that restrict business growth versus tearing down barriers and allowing business to flourish? I really think that you have had a sock pulled over your head for the last 20 years. 

AccreditedEYE's picture

I think CD "argues" that Bill's words, no matter how nicely put, are usually only self-serving.

bigdumbnugly's picture

exactly AEYE. 

gross seems to be one of those guys that when he speaks the truth about something you either have to watch what his left hand is doing or assume he's being nudged away from the teat and having a hissy fit.

cd: sorry but that "short" part precludes me from any mouth stuffing i'm afraid.


RSDallas's picture

Every persons words (if ever put into action) benefit somebody.  Do you or Cog. speak words that will not benefit you?   The only people that ever get in the way of any of our success is ourselves.  Period.  You can choose to be a part of the problem or a part of the solution.  It appears to me that Mr. Gross has made a decision to be a part of the solution.  Good for him.

Cognitive Dissonance's picture

That's one hell of a large button I seem to have pushed on your forehead. Or is that just a zit?

No, I do not argue with people who have no interest in exchanging information, but rather in pushing their own message and point of view.

My argument is with Bill Gross speaking for his own self interest and benefit, but spinning it as if it's solely for "the people" that he humbly slaves away on his hamster wheel every day. Poor Bill, doing God's work without the recognition he deserves.

Apocalicious's picture

I don't see Gross pulling a Blankenfein anywhere, whining about how he has it bad or how he's doing good for the masses, or "God's work." He is in fact merely stating what is wrong with the system while trying to profit from it. What would you prefer he do? Turn into a Fed loving blowhard? Stop speaking the truth? Speak the truth but start intentionally losing money for his investors instead of front running based on his knowledge?


I personally have no problem with someone stating 1) the system is broken, here is why and then 2) investing rationally based upon that knowledge. I couldn't disagree with you more, CD. We need more investors of his gravitas to publicly whip the shit out of the policy makers to try to get some impetus for change. You or I, CD, are certainly not going to bring it about...

Apocalicious's picture

In fact, I'd go so far as to say your personal dislike for the man, likely driven by past documented instances of him unfailingly talking his book, has projected some sort of motivation onto him now, whereby you believe he is "slaving away for the people" or "trying to paint himself as a martyr" or "trying to drum up support for himself as a champion of the people."


I'd argue that is a factor of your beliefs, but not supported by his comments. He is now simply elucidating many, many otherwise ignorant people about what is wrong with the system, and IMHO, he's fairly accurate in his description of the process.

Cognitive Dissonance's picture

Thank you for putting in quotation marks something I did not say nor could you possibly know that I do or do not believe. Also thank you for assuming that I can't think rationally and must simply be reacting to my narrow minded bias. You don't know me nor have you read my articles about bias, denial and cognitive dissonance.

I take Bill Gross at his word. And he speaks out of both sides of his mouth. Currently he is sensing deep seated anger growing in the masses and he's trying to get on the less dangerous side of that anger while continuing to do what he wants to do, which is profit off the masses. I'm tired of hearing people tell me that participating in the rape of the masses is "rational" behaviour. If that is the case, sociopathic behaviour should also be considered rational.

RSDallas's picture

I'm tired of hearing people tell me that participating in the rape of the masses is "rational" behaviour.

Hoe exactly is Bill Gross raping the masses?  Please expound on this statement.  Bill did not originate one single mortgage that I know of, or make any loans did he?

Cognitive Dissonance's picture

He and the hundreds of billions (over a trillion if I understand correctly) under his control enables the rape. He's a (major) part of the problem. He's willing to talk about the problem, but he's not willing to stop being part of the problem. Of course, to just walk away and say he won't participate any more isn't very "rational" is it?

RSDallas's picture

Explain what you mean by rape. 

Cognitive Dissonance's picture

Is that an order or a request?

You've been on ZH for a year. If you don't comprehend what "rape of the masses" means at this point, I'm just wasting my time explaining it to you. Examples are posted several times a day by Tyler and various other contributors.

RSDallas's picture

I actually expected that answer.  Let me ask you another question; In your opinion, what does Bill Gross need to stop doing, so the rapes will stop?

Cognitive Dissonance's picture

I never said that Bill Gross could stop the rapes by doing anything or by stopping what he's doing. I said he was enabling it just as are many others.

Bill Gross is part of the problem. Period. He's conducting a public relations campaign to try to convince people that he's a reluctant warrior and would stop in a New York minute if only the others would stop as well. CYA.

nobita's picture

but if he quit pimco noone would listen to him thou and all his power would be gone.

him speaking up in such a frank fashion is a good thing. powerful people listen to him. those people do not read or care about your anonymous posts here on zerohedge.

sure he is part of the game but so am i.

i have done nothing but frontrun the FED buying goldminers hand over fist profiteering like a motherfucker for the past year. and i think you have been too.

so stop it with the holier than thou bullshit. neither gross nor you or i have a responsibility to save the world.

gross is biting the hand that feeds him speaking inconvenient truths and i think your malice should be directed elsewhere.

Cognitive Dissonance's picture

so stop it with the holier than thou bullshit. neither gross nor you or i have a responsibility to save the world.

This is where you and I differ by several degrees of magnitude. I can't "save the world" nor am I trying. But with no one being responsible for anything other than themselves, we now are where that thought process is playing out to it's end game.

Apocalicious's picture

What are Bill Gross's responsibilities as CIO of PIMCO? To make money for his investors. He is doing that. The cognitive dissonance comes in when he knows that this is enabling a system that dooms the country in the long run, so he speaks out against it. In fact, this is really the first time he's NOT talking his book.


Again, quit speaking in fucking platitudes and say what you think Gross should do. Quit PIMCO? Lose money on purpose? Stop speaking out about the ills of the system?


Easy to cast stones. Offer solutions. Douche-bag-ness aside (mustache removal notwithstanding), Gross is doing the right thing by speaking the truth. He can't fight the fed and intentionally lose money for his investors - thousands upon thousands of whom are small, retail guys. In fact, trying to bolster the retirement assets of these individuals is a GOOD thing for the financial future of our country.

Apocalicious's picture

I can honestly say I am completely disappointed by the intellectual dishonesty of your reply. I expect much, much more from you.


Sorry I paraphrased your exact words of "spinning it as if it's solely for "the people" that he humbly slaves away on his hamster wheel every day" into several similar phrases or concepts. I thought you were capable of understanding the similarity. The quotes were not referencing your exact words, merely lumping together several oft-bandied about phrases and concepts related to your inferences. If I used quotation marks thusly in a confusing fashion, I do apologize. It was not to insert actual words into your mouth, and I won’t quote things in a response that are not direct quotations going forward. Further, if I interpreted your exact words incorrectly vis-à-vis those quoted phrases, please offer a more clear interpretation for me.


However, you go on to state "Currently he is sensing deep seated anger growing in the masses and he's trying to get on the less dangerous side of that anger". Really, you "take him at his word" and yet, you are capable of getting inside his head and telling me what he is sensing? I didn't realize you were a psychic, or a hypocrite, or both.


Further, for someone who calls himself Cognitive Dissonance, I would have thought you were familiar with the fundamental attribution bias. (He does bad things because he’s bad, not because of the situation). Projecting an ad hominem argument that his comments are driven by “trying to get on the less dangerous side of that anger" just that – purely ad hominem. Sorry, I need evidence that supports this because otherwise it is simply your belief – your bias. An equally plausible situation is that Gross is in fact experiencing cognitive dissonance, and cannot sit idly by profiting from a system he knows is dooming the country. In fact, it is much more likely a classic case of cognitive dissonance than anything else. I pose the question to you: if you were in his shoes, what would you do? Quit? How could that make things better? Stop speaking the truth? Intentionally invest in such a way as to buck the system and likely lose money in the short run as a result?


Cognitive Dissonance's picture

It always amazes me how some people who appear to have justified in their own minds that doing nothing is the correct course of action are often (not always) very opposed to those who say we are all responsible for doing something to chnage the process. So I suggest you might be the pot calling the kettle black when you call me intellectually dishonest.

And while I was never in his shoes scale wise, I was "in his shoes" at one point and I withdrew pretty early in my carrer to a very small practice where I'm able to practice what I preach to the extent the system allows me to. As best I can considering I don't make the rules nor do I have the financial clout to make any difference, I do not surrender to the financial system that encourages the eating of the weakest. There are simply many things I refuse to do that others in my field have no problem doing in the interest of self interest disguised as the client's best interest.

Apocalicious's picture

That is certainly admirable. I'm not disagreeing with the concept of personal accountability. My god, I have never met in my entire life a bigger proponent of that concept than me, yourself included, friend. You also do not know the positions/firms I have left as a result of my cognitive dissonance. All of my clients are wealthier than I am, and not because they are HNW. Not one has ever lost a dime net/net investing with me - including clients that liquidated before I recovered the 2008 losses. I literally made them whole out of my own pocket. (Thankfully, only one client left before recovering their HWM, or I would not have been able to subsidize it.)


But as you yourself note, we are constrained by the confines of the system. And we have responsibilities to fulfill (to my children, for example) that sometimes require comprises. There is no way around this. Is it "better" to knowingly accept a weaker financial position for my children's future so that I can feel good about my ethos?


So again, you can't qualify it "scale wise". Bill Gross can only do what he can do NOW, not in some hypothetical situation. He has been a part of the problem for a long time. What difference does that make now? That is a sunk cost - you don't hold a position because of what you paid for it, only what it is worth right now. What other course of action by Gross would do a better overall social good and meet his multiple responsibilities across constituencies?

trader's picture

CD and everyone,

I smell a rat in here.  seems like the bankstas et al have infiltrated ZH to dis-credit some of our more active speakers of truth, now that ZH has gained more popularity


The story of certain govt agency posting on wikipedia came to my mind..


don't let them win CD..hope TD is taking notice

Cognitive Dissonance's picture

In a month or so, I'm planing on posting a chapter of my still unfinished novel describing (using fiction of course so everyone can maintain plausible deniability) how private, corporate and state interests are pushed and protected on blogs such as ZH.

The one mistake most average Joe's make when writing comments on any blog is assuming that everyone on the blog is just like them. There are many actors on these blogs with ulterior motives. Of course, they will vehemently deny this. One of the keys to smoking them out is the constant hammering away with no self doubt at all.

Only the hopelessly indoctrinated as well as the well trained psyops agents can do this all the time. The hopelessly indoctrinated don't waste their time on these blogs. They're out there making hay while the Fed sun still shines.

RSDallas's picture

You have pushed a button Cog.  Finally, someone has began to address the real root cause (at least a large portion) of why America and most other developed Nations are where we are today.  We have become a Nation of financial charlatans and crooked politicians because we have more or less lost our desire to work hard as a Nation.  Not every person, but more than the majority.  It's far easier to figure out how to con someone out a few million or promise someone something of value for nothing than it is to design, build and manufacture something. 

StychoKiller's picture

Guess in your movie, there's no such thing as a multi-millionaire patriot -- sounds like YOU need to stretch your imagination a bit.

Sancho Ponzi's picture

The problem is not a lack of 'aggregate demand'. The problem is excess capacity fueled by  a decade of ridiculously low interest rates in combination with unsustainable borrowing by individuals and corporations.

shushup's picture

The truth hurst doesn't it?

Don't worry it won't stop your bull rally.

chopper read's picture

agreed, CD. 

after 30 years + of frontrunning US tax payers via the US bond market, and becoming a billionaire in the process, Bill Gross now wishes to become 'a man of the people'.

...i don't think so, asshole.

Sqworl's picture

Newport Mothership compound is not easy to penetrate!!!

Oh regional Indian's picture

This Bill is Gross. He speaks with a forked tongue.

As he keeps his mouth fastened to the insider teat, releases it long enough to give his name to an anti-establishment article, adds to the noise and confusion and goes right back on sucking.

What a bunch of clay-footed losers all of the geniuses of the American Financial landscape are proving to be. They were all insiders. All. Each and every one of them.

Till today, Milken is on teat and on message.

Massive ignore.


pgeorgan's picture

He isn't sucking at the teat of anybody. The man is a genius. Admitting to profiting off of Washington's dumb policies is not a crime. This is America. Get over yourself. The country is full of lazy, pot-smoking alcoholics who all want a shiny new home and a big, fat Cadillac Escalade. That is why this country is f$%#ed.

In the words of the great Mr. Lebowski, "My advice is to do what your parents did; get a job, sir."

Oh regional Indian's picture

Your tone precludes a serious response.

Your post implies nary a shred of real-world knowledge.

Probably a shill. Only a shill would say something as meaningless as This is America.

Go shop, twerp. Your country needs you.


youngman's picture

I think what he said is true..but yes he is an insider speaking out of both sides of his mouth..CYB..cover your bonds.......but that is exactly why I moved to Colombia...

youngman's picture

I think what he said is true..but yes he is an insider speaking out of both sides of his mouth..CYB..cover your bonds.......but that is exactly why I moved to Colombia...

HarryWanger's picture

Just got a quick chance to check in - wow! Great data from US, UK, China - everything's on fire and the market is loving it! Check back later. Great day for markets and our company in a landmark day!

rapacious rachel wants to know's picture
rapacious rachel wants to know (not verified) HarryWanger Dec 1, 2010 10:06 AM

the house is on fire and you're sittng down to dinner

flee! flee, I say!

Sancho Ponzi's picture

Explain HSKAX, BDI, Euro growth rate, interest rate required to sell Portuguese bonds, etc.

gwar5's picture

Just anti-pitchfork rhetoric from Gross.

When the SHTF he can say he told us so.


HarryWanger's picture

Just got a quick chance to check in - wow! Great data from US, UK, China - everything's on fire and the market is loving it! Check back later. Great day for markets and our company in a landmark day!

Internet Tough Guy's picture

If you read the article before posting you might seem less incoherent. But not much.

Mark Medinnus's picture

Bill Gross: yawn...*flush*

erik's picture

ISM meets expectations but internals are surprising.  The private inventory rebuilding is over.  Watch for next month's release to demonstrably deteriorate due to the USD strength from Sept/Oct.

The market was poised for a major breakthrough and ISM really let it down.

The pressure is now firmly on Trichet tomorrow to do something. 

Rodent Freikorps's picture

ADP's stock price is up. Seems they are being rewarded.