PIMCO

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Frontrunning: February 28





  • Yuan suffers biggest weekly loss as PBOC punishes speculators (Reuters)
  • Euro Gains as Bonds Decline With Stocks on Inflation Data (BBG)
  • Biggest Sovereign Fund Forced to Sell Stocks as Mandate Breached (BBG)
  • Because we don't already have enough fried foods.. (Reuters)
  • Putin: Russia to Consider Aid to Ukraine (AP)
  • Wall Street Hates JPMorgan Fee for $1 Trillion Junk Loans (BBG)
  • Yellen Sticks to Plan Amid Weather Doubts (WSJ)
  • U.S. Retail Chains See First Profit Decline Since Recession (BBG)
 
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El-Erian To Gross "I'm Tired Of Cleaning Up Your Shit"





Bill Gross, by his own admission, is a demanding boss; but as the WSJ reports, one day last June (amid the bond sell-off), things went a little turbo (leading to Mohamed El-Erian's recent resignation):

Gross: "I have a 41-year track record of investing excellence... What do you have?"

El-Erian: "I'm tired of cleaning up your shit."

While careful to deny that El-Erian's departure had anything to do with 'friction' although even Mr.Gross admits he can be difficult to work with,"sometimes people will say 'Gross is too challenging,' and maybe so. I would say if you think I'm challenging now, you should have seen me 20 years ago."

 
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Frontrunning: February 25





  • Turkish PM says tapes of talk with son a fabrication (Reuters) but opposition confirms authenticity, and national TV carriers cut parliament when played live
  • Inside the Showdown Atop Pimco, the World's Biggest Bond Firm (WSJ)
  • Ex-Jefferies Trader’s Customers Say Lies Common Tactic (BBG)
  • Bitcoin exchange Mt. Gox disappears in blow to virtual currency (Reuters)
  • The messenger mania is spreading: SoftBank Said to Seek Stake in Naver’s Line Messaging Unit (BBG)
  • Ukraine Replaces Central Bank Head (BBG)
  • Yup, an actual headline: Harsh weather tests optimism over U.S. economy (Reuters)
  • Hiring of Law Grads Improves for Some (BBG)
  • Easy Currency Bet Gets Harder as the Chinese Yuan Tumbles (WSJ)
  • In Ukraine turbulence, a lad from Lviv becomes the toast of Kiev (Reuters)
 
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Are Animal Spirits Deflating?





Unfortunately many investors, with central banks having slashed deposit rates to de minimis levels, have gone ‘all-in’ with regard to risk assets in the desperate pursuit of yield. Be careful what you wish for. It is quite clear that central banks will do literally anything within their power to attempt to avert deflation – to ensure that “it cannot happen here”. That does not mean they will succeed – but they may end up destroying fiat currencies in the process (one of the reasons we have consistently held gold). It is “quite obvious” what the Fed will ultimately do... Six years into this crisis, and in the words of Lily Tomlin, things are going to get a lot worse before they get worse.

 
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An "Austrian" Bill Gross Warns: "The Days Of Getting Rich Quickly Are Over... Getting Rich Slowly May Be As Well"





If readers ignore the rest from the latest monthly insight from Bill Gross of PIMCO, they should at least read the following insight which we agree with wholeheartedly: "our PIMCO word of the month is to be “careful.” Bull markets are either caused by or accompanied by credit expansion. With credit growth slowing due in part to lower government deficits, and QE now tapering which will slow velocity, the U.S. and other similarly credit-based economies may find that future growth is not as robust as the IMF and other model-driven forecasters might assume. Perhaps the whisper word of “deflation” at Davos these past few weeks was a reflection of that.... don’t be a pig in today’s or any day’s future asset markets. The days of getting rich quickly are over, and the days of getting rich slowly may be as well. Most medieval, perhaps." Where have we read this recently? Why in An “Austrian View” Approach To Equity Prices in particular and the bulk of Austrian economics in general. Which means that following the TBAC, i.e. the committee that really runs the US, none other than the manager of the world's largest bond fund has now moved over to the Austrian side. Welcome.

 
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Bill Gross Warns "China Is The 'Mystery Meat' Of Emerging Markets"





"Financial systems are unstable with excessive risk-taking," warns PIMCO's now solo guru Bill Gross, telling Bloomberg TV's Stephanie Ruhle that in a "Soros reflexivity... Once you get the levered system going, it hardly knows when and where to stop." Credit, as we have noted, has been relatively more stable (though less positive on the the way up) Gross notes and "the way to get rich in the past was to borrow money and to lever [up]," but Gross explains that now, "assets are artificially priced... from this point forward, double-digit returns, getting rich on leverage, no. You better look elsewhere for – for your profits," and not Asia. China is "the mystery meat" of emerging market countries, Gross cautions, "nobody knows what’s there and there’s a little bit of baloney."

 
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Frontrunning: January 30





  • Only time will define Bernanke's crisis-era legacy at Fed (Reuters)
  • Record Cash Leaves Emerging Market ETFs (BBG)
  • Investors Look Toward Safer Options as Ground Shifts (WSJ)
  • Fed Policy Makers Rally Behind Tapering QE as Yellen Era Begins (BBG)
  • Rating agencies criticise China’s bailout of failed $500m trust (FT)
  • Russia to await new Ukraine government before fully implementing rescue (Reuters)
  • U.S. readies financial sanctions against Ukraine: congressional aides (Reuters)
  • Companies resist president’s call for minimum wage rise (FT)
  • Secret Swiss Funds at Risk as Italy’s Saccomanni Visits Bern (BBG)
  • Top Democrat puts Obama trade deals in doubt (FT)
  • Erdogan to Give Rate Increase Time Before Trying Other Plans (BBG)
 
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4-Week Bills Price At Highest Bid To Cover Since 2011; Continue Trading Negative In Secondary Market





Today the ante was just upped once more, as the 4 Week Bill Bid to Cover rose yet again, from 6.4x to 6.6x. Logically, this print is now the latest and greatest highest Bid to Cover since December 2011, and the question remains: why the scramble for safety?

 
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Frontrunning: January 22





  • Winter Storm Expected to Make Northeast Commutes Harder  (BBG)
  •  Invasion of Spanish Builders Angers France Struggling to Compete  (BBG)
  • Toronto mayor, caught ranting on video, admits drinking a 'little bit" (Reuters)
  • IBM's Hardware Woes Accelerate in Fourth Quarter (WSJ)
  • Sharp Divisions Come to Fore as Peace Talks on Syria Begin (NYT)
  • Afghanistan cracks down on advertising in favor of U.S. troops (Reuters)
  • Microsoft CEO Search Rattles Boards From Ford to Ericsson (BBG)
  • Banks Sit Out Riskier Deals (WSJ)
  • Netflix Seen Reporting U.S. Web Users Reach 33.1 Million (BBG)
 
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Mohamed El-Erian Leaving PIMCO





Said Dr. El-Erian: “I have been extremely honored and fortunate to work alongside Bill Gross, who is one of the very best investors in the world. His talents are truly exceptional, as is his dedication. I have also been amazingly privileged to work with the most talented group of professionals in the investment management industry. Their commitment and tireless work on behalf of our clients have been a consistent inspiration for me since I first joined PIMCO back in 1999.  I wish them continued great success.”

 
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Bill Gross On Central Banker Bartenders





 
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Hoping To Get Rich? Bill Gross Has Some Bad News For You





 
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Frontrunning: January 10





  • From the guy who said the market is not overvalued: Q&A with Fed’s Williams on Upbeat 2014 Outlook and What Keeps Him up at Night (Hilsenrath)
  • Obama Readies Revamp of NSA (WSJ)
  • Indian envoy leaves U.S. in deal to calm diplomatic row (Reuters)
  • China overtakes US as largest goods trader (FT)
  • Wall Street Predicts $50 Billion Bill to Settle U.S. Mortgage Suits (NYT)
  • Low-End Retailers Had a Rough Holiday: Family Dollar, Sears Struggle as Lower-Income Customers Remain Under Pressure (WSJ)
  • ECB charts familiar course as Japan, US and UK begin to diverge (FT)
  • Housing experts warn of hiccups as new U.S. mortgage rules go live (Reuters)
  • It's a HFT eat HFT world: Infinium ex-employees sue over $4.1m loss (FT)
  • Slowing China crude imports to challenge exporters (FT)
 
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Bill Gross' 2014 Investment Outlook: All About Inflation





According to Bill Gross the outlook for 2014 is all about inflation, and how it will impact bonds in the 1-5 maturity bucket: "I am amazed at the fascination and emphasis placed on the u-rate during employment Fridays. Bond prices will move (in some cases by points) with a minor up or down change in unemployment relative to expectations, but when it comes to the third little pig of the litter – inflation – no one seems to care. This number – the PCE annualized inflation rate – is released near the 20th of every month but you will not see CNBC or Bloomberg analysts waiting with bated breath for its release. I do. I consider it the critical monthly statistic for analyzing Fed policy in 2014. Why? Bernanke, Yellen and their merry band of Fed governors and regional presidents have told us so. No policy rate hike until both unemployment and inflation thresholds have been breached and even then “they’re not thresholds,” they’re forks in the road that may or may not lead in a different direction. If so, then 1-5 year bonds, combined with credit, volatility, curve rolldown, and a dollop of currency should float a bond investor’s boat in 2014 and avoid breaking the buck in total return space.... If PCE inflation stays below 2.0% and inflationary expectations don’t rise appreciably above 2.5%, then a 3-4% total return for 2014 is realistic. "

 
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Frontrunning: January 3





  • Heavy snowstorm hammers northeastern U.S. (Reuters)
  • Coins Remain a Bright Spot for Gold (WSJ)
  • Gross’s Mistake on Fed Taper Echoes Across Pimco Funds (BBG)
  • China December services PMI falls to four-month low (Reuters)
  • General Mills Starts Making Some Cheerios Without GMOs (WSJ)
  • U.S. considers flammability risk of Bakken crude after accidents (Reuters)
  • China Mobile’s Costly iPhone Deal with Apple (WSJ)
  • Hezbollah Upgrades Missile Threat to Israel (WSJ)
  • UK House Prices Cap Best Year Since 2006 as Mortgages Surge (BBG)
  • China tells police to be loyal to party amid graft crackdown (Reuters)
 
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