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Bill Gross: 'Pick Me! Pick Me!'

by: Paul Kedrosky September 05, 2008 | about stocks: FNM / FRE    
Paul Kedrosky

Paul Kedrosky

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Am I the only one irritated by the fawning treatment given Pimco's Bill Gross and his commentary Thursday?

His implicit threat of a bond buyer's strike -- he wants the Fed to get off its ass and backstop Freddie/Fannie -- is so deliriously self-serving. He is into mortgage-backed bonds and FHM/FRE up to his neck, and now he wants Treasury to bail him out or he'll stop buying? How lovely.

And, oh yes, I'm highly fond of the "new balance sheet" euphemism than he coins in the piece.

[via Pimco]

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This article has 18 comments:

  •  
    Sep 05 08:23 AM
    I agree. It's sad but hardly surprising.
    Reply
  •  
    Sep 05 08:46 AM
    PIMCO's comments just proved what we already knew....no bailout for the GSE's. Self-serving is an understatement. Nice call.
    Reply
  •  
    Sep 05 09:19 AM
    No, you're not the only one. In fact, I'm fed up with seeing fund managers appear on CNBC to push an agenda they pretend is in the public interest but which is really designed only to make them money.
    Reply
  •  
    Sep 05 10:05 AM
    I agree with the author. These actions are entirely self serving. Gross wants the government to infuse money into the financial sector, thereby propping up the bonds of the companies therein, which he just happens to have a boatload of in the portfolio he manages. He isn't giving his opinion on what he feels would be best for the economy as a whole.
    Reply
  •  
    Sep 05 11:00 AM
    Gross and others are insistent that the holders of equity not be rescued since an investor there is risk when stck is purchased. This is a good use of the "moral hazard" argument.

    However, when an investors buy DEBT, they also assumes risk - whether an individual, a large bond fund or even foreign countries in the case of FRE and FNM.

    IMO coming to the rescue of Gross and other holders of
    the debt is a worse moral hazard than saving the shareholders. After all, it was the debt markets that exhibited the risky behavior. I suspect that most of the FNM and FRE shareholders held the stock because they thought it was a conservative investment. The big traders of debt knew what they were doing and deserve to go down with the ship, right along with the holders of the equity if those companies fail. Otherwise the debt traders, now free of any pain and with some assurances that they will be held harmless in the future, will once again resort to the risky behavior that got them into trouble in the first place.
    Reply
  •  
    Sep 05 11:31 AM
    Very good article and very good comments. You'll know when things have taken a turn for the better when people like Gross, the name fits, actually step up to the plate and take responsibility for their actions instead of looking for those who did the right thing take the fall for them. I wouldn't hold my breathe because that just aint the Wall Street way.
    Reply
  •  
    Sep 05 02:29 PM
    Bailing out Gross, would be gross.

    Where's my bailout?

    Me first!
    Reply
  •  
    Sep 05 11:40 PM
    Great article and right on the money. Why should equity holders get wiped out when just a 3 months ago the govt. was assuring investors that the GSE's were well capitalized and then eased regulatory restrictions and directed them to buy more mortgages. The companies are still within their statutory leverage requirements. Who in their right mind would trust them again?
    Reply
  •  
    Sep 06 12:42 AM
    Gross is a obviously a whiny loser (except when he`s got a bull market to help make him look good) and anybody that believes anything that a corporation or the government ``assures`` them is an idiot. The really smart criminals go to Wall Street and DC.

    Price and volume charts are the only truth and they clearly say `more down` at least for now (as they have since mid-2007 and esp since the end of May).
    Reply
  •  
    Sep 06 05:08 AM
    anyone who went long these companies after they had accounting scandalsis foolish. ccounting scandals are like herpes.Their effects are not left behind. The government like it or not needs to be cogziant of Gross and others "needs".If you own a business and the customers wont buy your product you have problems. This fannie reddie sitution is like a kidney stone.Until i is dealt with the stock market and credit markets will be "stalled".. Our government wastes billions of dollars on bridges to nowhere and the big dig and of the sex life of fruit flies. Lets unlock billions of dollars of "equity" by resolving this Asap
    Reply
  •  
    Sep 06 08:19 AM
    Bill Gross makes me sick. He basically has a license to print money. His formula is simple. All he has to do (as a go-to expert/guru for and advertiser on CNBC--and of course also as a still active investor) is go on TV and say which way he wants the markets to go. Sadly, all the sheep follow him and he makes a killing--up or down. Nice set-up if you can get it! Buy another house Bill! It's a tough call about who is more irritating, manipulative or self-serving: Cramer or Gross.
    Reply
  •  
    Sep 06 09:44 AM
    Fact this am: Bill wins. You lose.
    Reply
  •  
    Sep 06 10:12 AM
    When we go deep into the ownership of the bonds/equity/preferred shares of Freddie and Fannie we realise that the average person on the street is not going to get a bailout ... the tax payer pays for the mistakes of the corporation
    Reply
  •  
    Sep 06 11:24 AM
    good comments and good article.
    Reply
  •  
    Sep 06 07:46 PM
    Bill Gross for President................ Zimbabwe
    Reply
  •  
    Sep 06 09:10 PM
    Of course, Let Fannie and Freddie FAIL, and every bank, small, mid, large, international, multinational, every foreign soveriegn wealth fund, every insurance company Lose and Lose Big,and don't come back. . . and in the inaction wipe out any chance of a real estate recovery in our lifetimes, guarantee a Depression, Since NO One will have the nerve( or capital) to lend small business(especially U.S. businesses), let alone lend on a 'home'. Maybe I missed the fact that common shareholders have lost 95% of their investment in these GSE's already, so inflict more pain on the more conservative investors into U.S. agency debt. The plan is to save the borrowers/homeowners with mortgages from losing their homes by providing a AAA backstop on their loans, if they qualify(U.S.Government... rather than being put on the street like in the 'Grapes of Wrath', which is the other alternative that I guess you must prefer in your small-minded, more self-serving viewpoint. I just left a Real Estate office, they have a 67 month supply of listings, because no one can get a mortgage, car sales are Down 33%, no more leases. Got Solution? Go figure.
    Reply
  •  
    Sep 06 11:26 PM
    Like it or not it would be a catastrophe for the US Dollar and for the US economy (instantly much higher back end interest rates) if the debt holders were hit on a large scale. Surely however the yield difference between treasuries and GSEs over the past 5y+ should be clawed back from Bill and the foreignors through some sort of debt restructuring.
    Reply
  •  
    Sep 07 12:40 AM
    Believe it or not, they can trade elsewhere
    Reply
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