Am I a great investor? No, not yet. To paraphrase Ernest Hemingway’s “Jake” in The Sun Also Rises, “wouldn’t it be pretty to think so?” But the thinking so and the reality are often miles apart. When looking in the mirror, the average human sees a six-plus or a seven reflection on a scale of one to ten. The big nose or weak chin is masked by brighter eyes or near picture perfect teeth. And when the public is consulted, the vocal compliments as opposed to the near silent/ whispered critiques are taken as a supermajority vote for good looks. So it is with investing, or any career that is exposed to the public eye. The brickbats come via the blogs and ambitious competitors, but the roses dominate one’s mental and even physical scrapbook. In addition to hope, it is how we survive day-to-day. We look at the man or woman in the mirror and see an image that is as distorted from reality as the one in a circus fun zone.
Yet at first blush, there is a partial saving grace in the money management business. We have numbers. Subjective perceptions aside, we have total return and alpha histories that purport to show how much better an individual or a firm has been than the competition, or if not, what an excellent return relative to inflation, or if not, what a generous amount of wealth creation over and above cash … the comparisons are seemingly endless yet the conclusions nearly always positive, rendering the “saving grace” almost meaningless: everyone in their own mind is at least a six-plus or a seven, and if not for the most recent year, then over the last three, five, or 10 years. Investors thrive on the numbers and turn them in their favor when observing their reflections. That first blush becomes a permanently rosy complexion with Snow White cheeks.
The investing public is often similarly deceived. Consultants warn against going with the flow, selecting a firm or an individual based upon recent experience, but the reality is generally otherwise. Three straight flips of the coin to “heads” produces a buzz in the crowd for another “heads,” despite the obvious 50/50 probabilities, as do 13 straight years of outperforming the S&P 500 followed by … Well, you get my point. The Financial Times just published a study confirming that a significant majority of computer simulated monkeys beat the stock market between 1968 and 2011 – good looking monkeys that is.
In questioning initially whether I am a great investor, I open the door to question whether other similarly esteemed public icons like Bill Miller are as well. It seems, perhaps, that the longer and longer you keep at it in this business the more and more time you have to expose your Achilles heel – wherever and whatever that might be. Ex-Fidelity mutual fund manager Peter Lynch was certainly brilliant in one respect: he knew to get out when the gettin’ was good. How his “buy what you know best” philosophy would have survived the dot-coms or the Lehman/subprime bust is another question.
So time and longevity must be a critical consideration in any objective confirmation of “greatness” in this business. 10 years, 20 years, 30 years? How many coins do you have to flip before a string of heads begins to suggest that it must be a two-headed coin, loaded with some philosophical/commonsensical bias that places the long-term odds clearly in a firm’s or an individual’s favor? I must tell you, after 40 rather successful years, I still don’t know if I or PIMCO qualifies. I don’t know if anyone, including investing’s most esteemed “oracle” Warren Buffett, does, and here’s why.
Investing and the success at it are predominately viewed on a cyclical or even a secular basis, yet even that longer term time frame may be too short. Whether a tops-down or bottoms-up investor in bonds, stocks, or private equity, the standard analysis tends to judge an investor or his firm on the basis of how the bullish or bearish aspects of the cycle were managed. Go to cash at the right time? Buy growth stocks at the bottom? Extend duration when yields were peaking? Buy value stocks at the right price? Whatever. If the numbers exhibit rather consistent alpha with lower than average risk and attractive information ratios then the Investing Hall of Fame may be just around the corner. Clearly the ability of the investor to adapt to the market’s “four seasons” should be proof enough that there was something more than luck involved? And if those four seasons span a number of bull/ bear cycles or even several decades, then a confirmation or coronation should take place shortly thereafter! First a market maven, then a wizard, and finally a King. Oh, to be a King.
But let me admit something. There is not a Bond King or a Stock King or an Investor Sovereign alive that can claim title to a throne. All of us, even the old guys like Buffett, Soros, Fuss, yeah – me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience. Since the early 1970s when the dollar was released from gold and credit began its incredible, liquefying, total return journey to the present day, an investor that took marginal risk, levered it wisely and was conveniently sheltered from periodic bouts of deleveraging or asset withdrawals could, and in some cases, was rewarded with the crown of “greatness.” Perhaps, however, it was the epoch that made the man as opposed to the man that made the epoch.
Authors Dimson, Marsh and Staunton would probably agree. In fact, the title of their book “Triumph of the Optimists” rather cagily describes an epochal 101 years of investment returns – one in which it paid to be an optimist and a risk taker as opposed to a more conservative Scrooge McDuck. Written in 2002, they perhaps correctly surmised however, that the next 101 years were unlikely to be as fortunate because of the unrealistic assumptions that many investors had priced into their markets. And all of this before QE and 0% interest rates! In any case, their point – and mine as well – is that different epochs produce different returns and fresh coronations as well.
I have always been a marginal or what I would call a measured risk taker; decently good at interest rate calls and perhaps decently better at promoting that image, but a risk taker at the margin. It didn’t work too well for a few months in 2011, nor in selected years over the past four decades, but because credit was almost always expanding, almost always fertilizing capitalism with its risk-taking bias, then PIMCO prospered as well. On a somewhat technical basis, my/our firm’s tendency to sell volatility and earn “carry” in a number of forms – outright through options and futures, in the mortgage market via prepayment risk, and on the curve via bullets and roll down as opposed to barbells with substandard carry – has been rewarded over long periods of time. When volatility has increased measurably (1979-1981, 1998, 2008), we have been fortunate enough to have either seen the future as it approached, or been just marginally overweighted from a “carry” standpoint so that we survived the dunking, whereas other firms did not.
My point is this: PIMCO’s epoch, Berkshire Hathaway’s epoch, Peter Lynch’s epoch, all occurred or have occurred within an epoch of credit expansion – a period where those that reached for carry, that sold volatility, that tilted towards yield and more credit risk, or that were sheltered either structurally or reputationally from withdrawals and delevering (Buffett) that clipped competitors at just the wrong time – succeeded. Yet all of these epochs were perhaps just that – epochs. What if an epoch changes? What if perpetual credit expansion and its fertilization of asset prices and returns are substantially altered? What if zero-bound interest rates define the end of a total return epoch that began in the 1970s, accelerated in 1981 and has come to a mathematical dead-end for bonds in 2012/2013 and commonsensically for other conjoined asset classes as well? What if a future epoch favors lower than index carry or continual bouts of 2008 Lehmanesque volatility, or encompasses a period of global geopolitical confrontation with a quest for scarce and scarcer resources such as oil, water, or simply food as suggested by Jeremy Grantham? What if the effects of global “climate change or perhaps aging demographics,” substantially alter the rather fertile petri dish of capitalistic expansion and endorsement? What if quantitative easing policies eventually collapse instead of elevate asset prices? What if there is a future that demands that an investor – a seemingly great investor – change course, or at least learn new tricks? Ah, now, that would be a test of greatness: the ability to adapt to a new epoch. The problem with the Buffetts, the Fusses, the Granthams, the Marks, the Dalios, the Gabellis, the Coopermans, and the Grosses of the world is that they’ll likely never find out. Epochs can and likely will outlast them. But then one never knows what time has in store for each of us, or what any of us will do in the spans of time.
What I do know, is that, like Michael Jackson sang in his brilliant, but all too short lifetime, I am and will continue to look at the man in the mirror. PIMCO, Gross, El-Erian? – yes, we’re lookin’ good – in this epoch. If there’s a different one coming though, to make our and your world a better place, we might need to look in the mirror and make a Chaaaaaaaange … Depends on what we see, I suppose. We will keep you informed.
Man in the Mirror Speed Read
William H. Gross
The greatest investor will not be distracted by temporary setbacks!
Precious metals have bottomed. Silver is a screaming buy!
Surge, silver!
Die, silver shorts!
If people have to sell silver because their dry powder profits have gone away and left them broke, then the price could drop further.
If JP Morgan keeps punching the average stacker in the gut, the average stacker might cough up some silver. The question becomes then, why does JP Morgan want my silver?
Sell your real money for paper. Welcome to the Weimar Republic.
Put your trust in the printer. As we print 85 billion a month we should work our way out of this mess in no time.
Great news! Monsanto beat estimates! Beat it! Beat it!
FUCK MONSANTO.
No, Monsanto f#cks you.
Monsanto=gut rot
Monsanto - get out of jail free card.
http://www.agriculturestraighttalk.com/monsanto-gets-a-free-pass/
this is monsanto's product design team in action http://img233.imageshack.us/img233/4338/dognunvintage.gif
I wonder if they had to train the dog not to bite?
That is disgusting.
We are attempting to ram the TeamDepends Protection Act through congress but our lobbyist demands to be paid in Bitcoin(s) and frankly, it scares us.
What's a Hemingway?
Several egos?
About 3 pounds
if that comes, you'll have something to sell.
Those who don't have it will have shit to sell...
Sure, negative rates, dry paper profit poof! Dry paper silver etfs POOF!
The price is already dropping in paper. Look at the BILLIONS and BILLIONS of short contracts
recently purchased. Soon POOF !
All-paper-tigers die in the end, or sooner.
I'm sexy and I know it, Bill.
Im thinking "Smooth Criminal"
That's "BAD"!
Who needs investors when you have taxpayers?
The FED will supply endless capital for free. Your savings are not needed, chump.
And since they can get coerced foreigners to work for nothing, your labor isn't needed, either.
When this mess blows up, your tax will be needed, so don't go away mad.
Chump.
who needs investors when you have pension funds and can charge 2% and suck at what you do
It's like every black American WITH A MENTAL DISORDER WANTS CHANGE!!!???
Obama is merely the darkest of our white Presidents ! His turnip green eatin' wife is our first black doe First Lady !
"Men give up one thing to take up another, but in spite of numerous changes they do not find peace. They are no better than monkeys who let go one bough to take hold of another, only to let it go again."
--Buddha
"All of us, even the old guys like Buffett, Soros, Fuss, yeah – me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience."
true dat
He is not an investor any more than any of you who daytrade yourselves silly. He is a lender. A money changer dealing with the government who spends the future in the here and now at interest at the expense of those yet born. He is an enabler. He and his kind perpetuate the system of deception and usury that leads to ruin. He's a snake oil salesman like Buffet and Ichan and all the rest so called "investors" who simply swap pieces of paper with no underlying interest in the products or services of those companies who issued the bits of paper.
It's all a lie.
There are no "investors" only gamblers and bettors some of whom win and some who lose. A true "investor" doesn't turn his portfolio over 4 times a year or more. A true "investor" has a vested interest in an idea not just flipping a profit.
Humanity is a species of gamblers now. From scratch tickets to online poker with Zynga, from grain futures to bingo in the church basement. Stop lying. None of this is "investing" it is betting and in Gross's case it's only one small step from being a payday loan broker.
Fuck him...one more useless guru money changer that sheep cheerfully follow
edit
Hoarding gold like Silas Marner is investing ! It's called cottage industry !
Without actual investors and people willing to take significant (gambling) risks with their own and others' money- there would be no food and no energy, you would have neither a job nor a home, much less iCrap or a live outlet to power it, or even get an internet connection to Zerohedge.
Society was built on the backs of actual investors and they continue to pay for the transfer of wealth to the ever growing volumes of useless eaters.
That said, treasury.gov is about as much and as wise an "investment" as pets.com. Risk/Reward has been totally screwed such there is more reward for taking less risk and delivering monetary as opposed to tangible returns.
Best post I've read in a while.
Biill Miller....that's the Legg Mason Fund gentleman, yes? My friend got creamy in that fund:
http://finance.yahoo.com/q/ta?s=LMOPX&t=my&l=on&z=l&q=l&p=&a=&c=
Basically, Gross is right; timing is everything.
This is his CYA for when the SHTF event(s).
3 years ago, he said the USA was in worse shape than Greece....and weve only tripled down on the disaster since he spoke up against big spending and big liability growth. He knows its coming and he doesn't want to be another "party pooper" and get out right now...so he needs a cya.
I think we already know Warren can't adapt.
For a manipulated kleptocratic crony insiders market, he is perfectly adapted. For what comes after, not so much
There are forces so great that it is impossible for one person to turn against them. Contrary to advice to go with the flow, it is not optional.
Want to make money? Just go for the monopolistic power to make The Money.
Until the Fed is abolished, banksters will always make money, no matter what if.
Great article, he comes across as really humble, and acknowledging his good luck of being in the right place at the right time, liked this;
humble indeed!
right place at right time, absolutely
just a coincidence that he made $1.7b on the Fannie Freddie bail out
just a coincidence that he was loaded to the gills with MBS in advance QE3
"I like the Walrus best," said Alice, "because you see he was a little sorry for the poor oysters."
"He ate more than the Carpenter, though," said Tweedledee
He made money because he predicted there WOULD be a bailout. You could have to.
Blah, blah, blah, blah .... pass on the Gross ego piece.
1. Access to cheap capital
2. Inside information
3. Power to change the playing field to one's advantage
rinse and repeat.
If there were any real investors, they are long gone.
Yes nobody gets ahead from hard work and HAS to be part of the maipulation crowd. Comment is disengenuous (sp)
JUMP!
It's gonna make you feel good,
oh! Shamon Shamon! Ooooooooooo
"Am I a great investor? No, not yet."
What no more access to "inside juice"? Because that's what it will take in the new epoch of crony capitalism.
After 30 plus years of relatively successful investing, it became apparent to me about five yars ago that everything I know about investing is obsolete and useless. To use Stephen King's phrase, "the world has moved on". I sometime feel like King's lonely gunslinger lurching along from one surreal situation to another, completely out of time and out of tune.
I am not in Bill Gross's class even in my own mirror, but we do seem to have that sneaking suspicion in common.
Gross is a stand up man. One of the few that actually look in the mirror and see the bias. I look in the mirror and wonder where the fuck did I get this sun damage from and why is my portfolio down 30%. Oh, that's because I am heavily weighted in miners......
For Christ's sake Bill....
CUT YOUR HAIR!!
Shave it off...it is so 1970s awful and has been for years!
Sayeth the person with the disgusting avatar.
I am perfect NA;therefore, I assist others in helping them get better!!! lol...
I got that from a book I was reading, Diary of a Wimpy kid, to my kids last night and I was laughing my ass off. Funny shit!!
The respons was from the book and it was the beginning where at New Years he is having trouble finding resolutions since he is perfect. So, he goes around and helps people become better.....(like telling his sister she eats chips too loud!).
funny stuff....I was surprised.
Bill Gross...wants to be the 'Best Investor Eva', in reality will probably just end up MFGloballed.
http://www.marketwatch.com/story/a-new-plaza-accord-will-drive-markets-higher-2013-04-03?link=MW_home_latest_news
Rumor is: THERE COULD BE ANOTHER GLOBAL BAILOUT THIS WEEK OR NEXT.
Panic at its best.
Total panic, yet so-called 'stawk markets' markets haven't suffered even a scratch. Why don't they all just plan a coordinated global Central Bankster bailout every week?
No need. The Fed is only one that matters. The rest are just dependent on the Fed.
The meeting would be for political purpose only, you know. to show the world "they're doing SOMETHING".
MarketWatch is all propaganda, be careful what you read there.........check the ownership of that rag
No doubt. I check marketwatch for the oil price only, it's always on.
The headline cought my eye.
How does a globally coordinated bailout with stocks etc. already at all time high's knock the price of oil down?
"Neither Japan or Britain have any serious scope to cut interest rates further. But they can launch fresh rounds of quantitative easing — there is no limit to how much money central banks can print if they are determined to. There is a catch, however. A stimulus weakens the currency. There is nothing wrong with that in itself. Indeed, a weaker currency can help an economy revive. But it is likely to provoke a response from other central banks."
It continues, "this response by central banks is the reason why gold has and will continue to sell of because...well....you have to....goddammit just sell your gold!"
It's a PROPAGANDA article.
It doesn't necessarily have to make sense.
Didn't we have one of these "globally coordinated stimulus" events not too long ago? The result was the markets ripped higher right?
That was in 2011, world swaps.
This is a CURRENCY FIXING idea same as in 1985 which Martin Armstrong send a letter to Ronald Reagan's treasury sec about.
He told that guy that it was going to be a disaster, which actually led to the market crash of 1987.
Ebony and Ivory
Michale Jackson. LMAO. Looked like a fucking sleestack from Land of the Lost. Truthfully he probably looks better now that he's embalmed. The embalming fluid probably had gold flakes in it. Good riddance freak.
It would be a darned sight easier to be a good investor when the market hasn't been completely taken over by a market manipulator. It's probably easier for someone who is closer to the manipulator.
DavidC
Anyone notice that there is only one stone child molester in history that still won't go away after he is dead? WTF is up with that?
I like Bill and like what he said here....
Buffoon, Lynch, Soros, etc.....they are good investors but jeez....right time, right place, right amount of money. Money buys money once you get going but to say that I was a great investor making a killing in the 80s, 1999 or 2008 is wrong and over-confident.
I was lucky at the right place, right time.
Buffet is not that smart. Lucky in the right place.
Bubbles.
A real investor will invest time and money into a private business that makes something tangible, but its almost impossible in this new normal epoch. At least give some props to sucsessfull small businees owners, they are real investors.
Sorry Bill, you might be the king of bonds, but you really are not creating any wealth.
Kings never create wealth, they just take it from the people who do. Wealth is created by people who produce more than they consume.
With interest rates going down steadily for 30 years it was impossible not to make money in your business, as there was always a margin to profit.
Maybe im wrong but I look at you and see a trader not an investor, because your only pushing paper around. Real investors invest in tangible goods and people.
Gross is one of the humblest, transparent guys you'd ever meet. He takes nothing for granted and still works 15 hr days. If you understood PIMCO and their process it would tell you why they are so successful. Anyone who thinks his level of success is built on inside information and manipulation than all I can say is you have no idea what you are talking about.
His point is we are all human and fallible and success is a combination of things but being in the right place at the right time (whether it be luck, divine intervention etc) is a factor that shouldn't be discounted. When one thinks they know everything is when they begin making mistakes. Unlike most, Bill is uncomfortable being put on a pedastool. I'd trust a guy like Gross 99.9% more than most investment people out there because he comes to work humbly everyday trying to do what's best for his clients/investors and understands what you did yesterday means nothing.
Oh great, channel a frigging child molester!
Come to think of it Bill, the way you look in that picture you just might......
Oh forget it.
Gotta love a government-based economy.
RE:
I think this should be renamed to, "What makes a great blackmailer?":
Remember the Golden Rule folks: He who has the Gold, makes the rules (and can psis on everyone else)
Note that song was written by Siedah Garrett.