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PIMCO To Buy Billions In European Toxic Debt
Earlier today we were surprised when none other than uber central-planning skeptic, not to mention bond fund manager, Bill Gross threw in the towel and in his latest letter advocated the purchase of risk assets - and Bill Gross is the last person needing reminding that in a day and age when the 10 Year yields just barely over 2.5%, this means not bonds but stocks. The surprise, however, promptly disappeared when we realized that PIMCO is merely the latest entrant in the scramble for yield game following, with a substantial delay to all of its other "alternative" asset management peers, right into ground zero: European toxic debt.
WSJ reports that Pimco quietly has raised $5.5 billion to buy bank assets in the U.S. and Europe and has closed the fund to new investors, according to a person familiar with the fundraising. The Bank Recapitalization and Value Opportunities II fund, or Bravo II, is being led by deputy chief investment officer Dan Ivascyn and will target a range of unwanted assets on the balance sheets of banks, including residential and commercial real-estate assets.
In other words: toxic, non-performing debt, which is something Europe's bank certainly have a lot of. How much? Recall that it was the IMF itself which said in October of 2012 that European banks needs to sell $4.5 trillion in assets until 2014. Naturally, they are way behind schedule, which means vulture investors will have a buyer's market in setting the price as banks have crossed the desperation point in finding buyers.
But it's toxic debt? How are non-performing loans, on which the obligor has most likely defaulted several times over, a good investment under any price? Well, the hope here, of course, is that as those tens of millions of unemployed workers find their way back into the work force, that the debt will be "worked out" and that recoveries on the said debt will make the purchase at deep distressed levels profitable.
Investors are lining up to snap up the unwanted loan portfolios and real-estate assets. Many of the targets lie in Europe, where banks have been busy shrinking their balance sheets primarily to meet stricter capital requirements.
The good news is that PIMCO will not have difficult finding willing sellers of such debt:
Last month, The Wall Street Journal reported that two of Italy's biggest banks, Intesa Sanpaolo and UniCredit were in talks with U.S. private-equity firm KKR regarding the sale of some of their restructured loans.
Commerzbank said in February that it had sold €710 million of Spanish commercial real-estate loans to investors. In the U.K. late last year, the Royal Bank of Scotland sold its first portfolio of U.K. commercial property assets to hedge fund Varde Partners, and in August, Spain's 'bad bank'—set up to house assets from the country's bailed out banks—sold its first real-estate assets to private equity group HIG.
Why is PIMCO doing this? Simple - following consecutive months of outflows, even the biggest bond manager in the world has finally "yielded" to the chase for yield, or as we described it last May - FOMO, aka Fear of Missing Out.
Pimco's new Chief Executive Douglas Hodge told Financial News last month that he wants to broaden the firm's equity expertise, including backing the hiring of teams by equity chief Virginie Maisonneuve. The firm offers products in derivatives, multi-asset, real estate, private equity, real return and emerging markets, but is still 90% exposed to fixed income
So as PIMCO too joins the great flood of one time skeptics who dare not look at themselves in the mirror and are willing to blindly follow the herd, one wonders: just how much more incremental dollars are out there left to chase assets that others are already selling. Because readers certainly remember that while algos, retail and momo speculators, not to mention TV pundit that invest with monopoly money, are rushing into the parabolic blow off top phase of the market, the smart money can't wait to get out, and its advice as of last August was simple: "sell now."
They can now also count PIMCO among the FOMO buyers.
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So, it would appear that the path to success really is becoming too big to fail. Good luck with that. One simple question, who will be insuring all of these "investments". Where have I seen this before...
I will be honest - lest I risk hypocrisy: Buying PIIGS bonds may be a rational play given alternate asset class returns, lest one truly believes that Germany & the relatively few solvent EU members will let the EU fall apart (and I once tended towards that line of thought, but lately...not so much).
PIMCO the new AIG?
No wonder El-Erian has jumped ship.
"Gross Toxic Assets"
fonestar will buy that for a satoshi!
Satoshi = 'TOXIC SUSHI" [like Bill Gross will be eating in Newport Beach for the next 'rest of his life']...
Satoshi and fonestar will be eating Beluga.
You'd better TRY & buy it now then Poindexter... It's your last chance...
He (Gross) received his marching orders from the money masters, and will comply.
Wasn't it toxic Euro debt that sank MF Global?
bill gross looks like he has cancer.
Bill is running the Dallas Buyers Club
...What does the NSA have on Bill Gross that would make him switch to the Darkside?
Bulging cans of opportunity must be consumed.
el erian is gonna look like a genius, because this is why he split.
He´d be better off buying about $2 billion worth of physical silver. He would be talked about for hundeds of years.
How many people even remember the Hunt Brothers today?
apparently, billy passed on the nail guns...
Uncanny resemblance to Little Bill in Boogie Nights
aka William H Macy
http://3.bp.blogspot.com/-IAieD52h-DU/UVzXB73U1iI/AAAAAAAAHAY/1dIXI49k-I...
"He (Gross) received his marching orders from the money masters, and will comply."
He works for Deutsche Bank. He hasn't been independent for years. Of course he'll do what he's told.
He's not in a position to 'moral up' and return investor monies. He'll simply become a prop division of DB and retire in comfort.
Next.
if equities are overpriced and bonds have no yield, there is simply nowhere to turn
oh shit
not fonestar again
Digital money to play around with digital debt, whats not to love? ;-)
Fire up da puter Mr.Yellen, we're takin this out a whole new door!!!
Whales?
"Well, the hope here, of course, is that as those tens of millions of unemployed workers find their way back into the work force, that the debt will be "worked out"
I would have thought the hope here would be that the ECB takes it off their hands, kind of like the fed did with MBS, helping him make a killing....
I agree, but I doubt he's relying on 'hope'. I assume he knows something, or just plans on using the 'investors' money as backstop for other purposes?
Given that hes "closed the fund to new investors", one assumes that these investors are big players, would that mean this ploy isnt trying to rope the little guy into it? I dont know what to believe anymore, but this guy is a 1%er, so he must be right. Right?
$50 bucks says that Gross probably bought a couple of billion dollars worth of Pimco put options in an offshore account...
Oh do tell, if true, then that's something I can trade. Got a source or something?
He knows GYELLEN will print a stealth bailout for the EU...Wait and watcb
What do you mean 'will'? She already has. It's never stopped, since '07.
Well, it does go back further . . .
Nah... just a silly hunch.
Otherwise it could only be explained by a very large brain tumor...
Bill is losing it now that EL ERIAN isn't around to wipe his ass and give him a reach around!
EL ERIAN went to Basel
"I'll gladly pay you Tuesday for a hamburger today" - J. Wellington Wimpy
When the world learns about Fukushimas effects on the US, Europe will seem a lot more desireable...
They're no more than 2-3 years behind. Now, the Southern Hemisphere maybe . . .
what else can he do, admit that all stocks and bonds are a fool's game at this point? that they are all fixed and equally bound for the financial junkyard?
He could probably afford to quit playing the game and retire. I've always wondered why rich old men work until they die. What would be the point of living simply to accumulate more and more just to buy the farm and leave it all behind? Very strange and sad really.
Gross says he buys what the Fed is buying. This is not good.
I know who won't be, the time police.
He looks like Fredo from the Godfather part 2.
he's smart
Fredo goes fishing smart.
lol now that was funny!
Is it me or does this guy have an enormous head
Does Bill Gross think that mustache makes him look younger?
Ack! Makes him look like an Australian pedophile.
I see his moustache, and raise him an asset.
If The Village People were still together, Bill Gross would be singing YMCA.
Because gay mustache & female hormone treatments..
philatest mate
why not buy VIPS and YY and PCLN and CANN
So who's backing Gross up? Gross is usually the middleman.
I'm sure CalPers is in there somewhere. They got a nose for shitty deals. And they needs to hit a 7.5 yield forever.
Janet, and there's got to be some serious strong-arming going on to make a company shift gears like this,
Purely a national disintegration play: buy discounted bonds and sell them at face value to the FED.
Shorter Bill Gross: "Fuck it."
I just dropped a toxic duce, if he wants to buy that too!
Is it a floater? Gross can package it up as a 'Floating Rate Note"
This is the best ZH day EVER
"Shitty ASSets."
Carl Levin (D-MI) quoting Goldman Sachs emails during Kangaroo Kabuki Theater Proceedings.
Unless you're from Japan you can at least use it to grow food.
last one to the table doesnt get much food...
Californian Bond portfolio managers' guide to slide presentations:
Never say Toxic Debt. Avoid 'junk bond' also. Instead say something like 'high yield'. To be extra safe just say 'extended quality'.
For bonus points, when you are dealing with simplistic independent advisors, don't say 'fixed income'. They won't understand. Just say 'bonds'.
Okay, that's funny as hell.
When Pimco is buying it, then its not toxic debt! Europe is in very good shape when compared to the US economy.
Especially after the markets learn the truth about Fukushima's effect on the US...
Overheard in PIMCO office one evening in 2015
Cleaner: "What the fuck is this on the desk?"
Gross: "O that, that's just some toxic debt"
Cleaner: "I'm tired of cleaning up your shit"
Toxic debit (TD) = shit (s), and people (Assholes (A2)) want this shit, and we assume shit (s) has value (v), then v=s*A2, I'm going to take a shit in an envelope and send it the IRS (A2), or A2=v/s. Taxes paid! You can't argue with math.
Very elegant. It must be true.
Everyone gets a bailout. Therefore, nothing is toxic. Next.
I think the bet is that central bankers have absolutely no choice but to print money forever because there is no chance that the debts/promises can possibly be paid back with real money. So if the value of paper is going to decline at an accelerated rate over the next decade, owning absolutely anything other than cash is a good bet.
So why not back up the truck with free paper money to buy toxic anything you can touch - especially real estate loans in countries where rich people from al over the world will want to live if things go south in emerging markets?
Its real money because you earned it and you freely give a portion to the central bank on a daily basis. They borrow against your future earnings. The system is so automatic its perpetual motion. They credit themselves yesterday for what you make today knowing that the madder you get the more they get! Before 2007-08 it was the exact same thing and nobody cared?
Yes, and it works right up until the supply lines break in earnest. history is very clear on that.
Hedge accordingly.
If it wasn't B.Gross being the subject than would you say that "banks in socialist countries are selling assets to American capitalist at near fire sale prices minutes before dollar collapses"? Or am I being obtuse?
Obtuse seems to the '/sarc' game here on ZH, ... me thinks its cute if your 14 years old, but after that it should have gotten a little tiring.
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Study what's going on Syria, China, Ukraine, Saudi, and Israel.
It's all about GETTING "EUROS" in this NWO order post USD. Everybody is fighting to get "INCOME", saudi's wanted to take GAZPROM out to sell direct to get permanent EURO stream.
Putin put his ball's on the line to KEEP that EURO stream.
The BIG guys see it coming. Too bad that ZH will not see it until they're hit by the train in the face, like always ZH is fed shit and like Bambi staring in the lights of the oncoming train, and nobody will tell the muppets to get off the tracks.
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Obtuse, ... no but sadly man-twat club never had any balls, or maybe after you have worked even a short time for Goldman Sach's you lose the abiltiy to speak honestly about any subject whatsoever.
Fuck the EU. Actually, nevermind. Hit the BUY button!
How's that Eike Batista bond maturity looking Bill?
DIMCO
Maybe Yanukovichs home mortgage is owned by an Italian bank. They are supposed to have a lot exposure to the Ukraine.
toxic debt? what does that mean? is that not language that once existed before the world became safe and warm and cuddly thanks to our powerful and benevolent overlords? no reason to use such antiquated language here on zh......
So why did El Erain leave? What was it, again?
personal sanitation issues
Just re-read all the current ZH headlines. Did I somehow sleep through March? Is today April Fools Day?
Truth is indeed stranger than fiction, apparently.
I smell doubling down desperation.
(and it looks like this cycles fall guy)
He plans on jump off at the last moment.
I thought Gross was already buying all that toxic crap. Me thinks he's just going public with it. Spanish and Italian 10s have no business being below 3.5%. Hell, they have no business being below 5.00%.
Yeah, PIMCO has been buying toxic crap. Odd.
Bill Gross is an avid stamp collector. Maybe PIMCO can start a philatest fund next. :-)
If Bill doesn't jump in there then Fidelity and Calpers get to have all the fun. ;)
Ahhhh... they figured out the truth about Fukushimas effect over the next few years... time to buy Europe...
PIMCO = AIG ,
God bless mohamed El Erian...
Hang on got to go Bill needs a caretaker and a helicoptor pilot
Bill's rocking a pretty mean cocksweeper in that shot.
If nothing else, I learn the latest, greatest perverse sexual slang on Zerohedge.
me to, problem now is I have to self-edit a lot when talking!!
Little Bill
http://3.bp.blogspot.com/-IAieD52h-DU/UVzXB73U1iI/AAAAAAAAHAY/1dIXI49k-I...
ROFL
They cant just sit on their hands.
They know they should, but cant resist the urge to spend someone else's money.
Bulls make money, Bears make money and now it would seem PIGS make money as well. We live in truley fucked times.
Why Not? It's all fake money anyway.
When B H Gross talks, people listen.
He cannot be that stupid.
TPTB must've held a gun to his head.
This all reminds of the fellow who joined the French Foreign Legion.
One Saturday afternoon a cry was heard, "THE CAMELS ARE COMING"
Soldiers all rushed out and had sex with the camels.
The new soldier was bewildered by all this but said nothing as he watched the stampede of men going out and grabbing a camel.
This however went on week after week and one day as they were all rushing out, he grabbed one of his fellow soldiers by the arm and asked him, "What's the great rush? You guys are only screwing camels."
The soldier pulled his arm away and started running but turned his head and called back, "YOU DON'T WANT TO GET AN UGLY ONE DO YOU?"
"Virginie Maisonneuve"
The Virgin of the Ninth House
How very caballistic ;o)
http://www.birlacenter.com/astrology/house/the-ninth-house
But but But, Warren keeps saying that US stocks and bonds are the mother lode of all capital invesment of the next decades !
Why does Gross challenge the Omaha sage?
Intelligent rat's jump the ship. For 60+ years Buffett got rich by Welfare for corporations, lying, and buying cherry-cokes, steaks and whores for politicians.
You all know what Buffett say's and does is 180 degrees.
Gross on the other hand is jumping ship, cuz the Titanic is going down, and he wan't some good shit.
It's fairly clear that the 'EURO' is the nicest tradeable paper on earth, that they'll bail out all, and the USA will be ran to the ground bailing out Europe ( thanks zio- ).
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Everybody wants Euros, ... GAZPROM, Israel, Saudi's, and the USA men who want to preserve their wealth.
Counter intuitive to the ZH moronity I know, ... but like we say, ZH is always wrong 100% of the time.
Perhaps he is frontrunning the ECB as he did the Fed?
It is called Spasm . something like Stoke-Cheyne aspiration . Found in complex systems when they are at inflexion points . About to undergo major phase changes .
Nah, it's not PIMCO=AIG, it's PIMCO=Countrywide and PIMCO=BofA
But those, of course, went bad.
PIMCO is buying into the QE-forever story, moar QE every day.
Who knows, maybe that's right.
Confucius say... he who thirsty for yield, drink from toilet.
Wouldn't it be poetic justice to see Gross and PIMPCO get nuked on eating too much of this trash. Along with the rest of the worthless trash that is in their bond portfolios.
I'll reserve judgement. I'm guessing PIMCO knows a hell of a lot more about bonds than I do. What looks crazy to me might somehow be a good idea. The best bargains are found in things nobody else wants to touch.
If stock markets crash in Europe tomorrow this guy will look like the "dumbest genius in history." Move along...
hmmm that new look....
Maybe Bill's getting out of bonds and into porn.
Don't look at the man in the eyes.
Yeah, keep an eye on those maturities, Bill.
Dumb cunt.
Oh sweet the Corzine play. Worked out so well for him and all people who got corzined. And its gone.
Coming, PIMCO, the mother of all bailouts.