What Up With Pimco?

WTF is up with PIMCO ?

Strange things are afoot at the biggest bond fund in the world. A weird sense of panic seems to be emanating from the West Coast fixed income specialists.

I suspect it may have something to do with with the fact they are loaded to the gills with paper from Fannie & Freddie (FNM & FRE) — a trade that has worked out exceedingly well. Despite this — or perhaps because of it — the latest noise from the boys from Newport Beach is increasingly odd, even desperate sounding.

I do not know if they are genuinely terrified of a major meltdown in the global economy, or worried about their book. Maybe they are looking for an exit, and not finding one.

The WSJ noted about PIMCO:

The bond-management firm has posted good gains since the credit crunch began last year, in part by betting big on mortgage debt tied to Fannie Mae and Freddie Mac — whose implicit government backing and relative safety compared with other securities has helped keep their bond returns in the black.

Now as both entities show continued financial weakness and many parts of the bond market remain pressured, a main challenge for Mr. El-Erian, 50 years old, will be sustaining Pimco’s winning returns.

Then came the very strange commentary Bill Gross posted at the PIMCO site — a weird, quasi-homage to Cramer, which then reiterated the expected pain of a deleveraging and asset liquidation.

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Gross: Please Bailout Frannie!

click for video

Gross

Here’s Gross:

What Happens During Delevering

1. Risk spreads, liquidity spreads, volatility, term premiums – they all go;

2. Delevering slows/stops when assets have been liquidated and/or sufficient capital has been raised to produce an equilibrium;

3. The raising of sufficient capital now depends on the entrance of new balance sheets. Absent that, prices of almost all assets will go down;

The above might seem simplistic to us at PIMCO but it is not necessarily clear to all readers. Term premiums? Risk spreads? Volatility? What do they have to do with bull or bear markets? Well, what Step 1 really says is that as GSEs, banks, investment banks, global hedge funds and even individual households delever their balance sheets by shedding assets, they lower the prices of not just what they are selling, but other securities that are arbitrageable within the marketplace.

Odd.

Maybe this is part of the problem: China Pulls Back From Fannie, Freddie

Amid jitters about the future of Fannie Mae and Freddie Mac, China’s four biggest listed banks have pared back their holdings in debt related to the two U.S. mortgage giants. At the end of June, the four banks held a combined $23.28 billion of debt issued or guaranteed by Fannie and Freddie. That’s a small fraction of the trillions of dollars outstanding, but the reductions attracted interest as a possible gauge of broader sentiment toward such securities.

In an interview with Bloomberg, Gross all but pleaded for a Federal bailout of Fannie/Freddie (U.S. Must Buy Assets to Prevent `Tsunami,’ Gross Says):

The U.S. government needs to start using more of its money to support
markets to stem a burgeoning “financial tsunami,” according to Bill Gross, manager of the world’s biggest bond fund.

Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in commentary posted on the firm’s Web site today.

“Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,” Gross said. “If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.”

The government needs to replace private investors who either don’t have the money to buy new assets or have been burned by losses, Gross said. Pimco, sovereign wealth funds and central banks are reluctant to fund financial firms after losses on investments they made to support the companies, Gross said. The world’s biggest banks and brokers have raised $364.4 billion in new capital after more than $500 billion in writedowns and credit losses since the beginning of last year.

OK, I’m game for a Federal bailout — but what’s a fair haircut for Stock holders? Preferred holders? Bondholders?  In exchange for the US putting the 5 trillion dollars worth of exposure back on the US books, I propose haircuts of 100%, 25% and 10% respectively.

Perhaps there is no natural exit, and they are fearful of  holding this to term, as some of the marks will be quite negative between now and when the paper is due.

Their solution? You and me and that guy behind the tree !

The rescue of Frannie PIMCO is proposing risks hyper inflation, as the government would be on the hook for another 5-6 trillion in liabilities, of which less than 10% are likely to default…

 

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Sources:
U.S. Must Buy Assets to Prevent `Tsunami,’ Gross Says
Jody Shenn
Bloomberg, Sept. 4 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZLLPW9YEa60&

There’s a Bull Market Somewhere?
PIMCO September 2008
Bill Gross
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/Investment+Outlook+Bill+Gross+Sept+2008+Bull+Market.htm

Pimco’s Gross Lets the Freak Out
Kevin Depew
Minyanville, Sep 04, 2008 3:47 pm
http://www.minyanville.com/articles/index/a/18807

China Pulls Back From Fannie, Freddie
Rose Yu and Amy Or
WSJ, September 3, 2008
http://online.wsj.com/article/SB122037859304991457.html

Pimco Names El-Erian CEO  Of the Bond-Investing Giant
DIYA GULLAPALLI
WSJ, September 5, 2008
http://online.wsj.com/article/SB122057292319901669.html

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What's been said:

Discussions found on the web:
  1. bk commented on Sep 5

    The government needs to use more of its own money? What money? Money to be printed, or does he mean debt?

  2. Jeff M. commented on Sep 5

    Remember, we’re also giving $1B in aid to Georgia. Print away! This is getting ridiculous.

    Any bailout that doesn’t include some pain for shareholders and bondholders will be a travesty……..therefore, that’s probably what will happen.

    Sad to see Gross begging for a bailout of his own bad decisions. THIS is capitalism and the “free markets?” What a joke……

  3. MJ commented on Sep 5

    I develop an idea for a cartoon and proposed it to an artistic friend for execution. It showed Goldman’s Lloyd Blankfein, Merrill’s ex Stan Oneil, PIMCO’s Bill Gross and Countrywide’s Angilo Mozilo under a corner street light in mini-skirts wearing lipstick leaning into the window of a foreign made luxury auto asking the driver if he liked what he saw. But after thinking about it a while I decided it was to much of an affront….to prostitutes.

  4. RJ commented on Sep 5

    It’s not just FNM/FRE paper that’s got them worried. Gross, El Erian & McCulley all articulated the “under the Fed umbrella” thesis in buying paper of the broker dealers and commercial banks.

    And to add, McCulley was all over the place in Jackson Hole, almost hysterically telling anyone and everyone that Paulson needs to “Show us the money!”. I believe Kathleen Hays of Bloomberg correctly asked him, after he made his plea that “it’s the only choice to save the economy”, if he owned the paper that would be saved, and he shamelessly said “That’s the point, when the money is shown, spreads will tighten and profit will be made”.

    BR has it right; You wanna play with moral hazard you have to be ready to get burnt. If, but more likely when, the “new balance sheet” is deployed, PIMCO and all the rest of the moral hazard players need to contribute, and haircuts on the debt is appropriate.

  5. Vermont Trader commented on Sep 5

    Here is the money quote from his piece…

    “Over $400 billion in bank- and finance-related capital has been raised during the past year, a decent amount of it, by the way, having been bought by yours truly and my associates at PIMCO. Too bad for us and for everyone else who bought too soon. There are few of these deals now priced at par or above, which is bondspeak for “they are all underwater.” We, as well as our SWF and central bank counterparts, are reluctant to make additional commitments.”

    Gee, Bill, I’m just a guy in a basement and even I knew you were too early.

    I’ll buy my mortgage off you right now for 90 cents on the dollar.

    But if you want me to buy it off you at par with my tax dollars you can go to hell.

  6. MarkTX commented on Sep 5

    Gross gives new meaning to an old classic…

    “Rich man, poor man, beggar man, thief.”

  7. TDL commented on Sep 5

    I think more of a haircut is in order, since many of these guys were looking for a tax payer… I mean government bailout. I like how Gross is screaming about Armageddon now so he can get his own bailout, but I suppose that was his strategy all along.

    Regards,
    TDL

  8. Mark E Hoffer commented on Sep 5

    Kevin Depew’ article rightly calls out Gross, the head of PIM(P)CO.

    His Flashback to Gross’ call of DOW 5000, in ’02, is all one needs to understand about Gross’ willingness to shill/ride this massive Credit Bubble.

    Are we seeing Gross ponying up his 10 digits to Help the USTreas swallow the load he’s willing to shoot their way?

    I think not, that’d be in major contradiction to the way this game is played..

  9. Jeff M. commented on Sep 5

    A little off topic, but me-thinks that McCain loses all of the Libertarian types (if he hasn’t already) to Bob Barr (to stay home) if the Feds come to the rescure here.

    If the mass American public had any clue how this impacts them, there would literally be rioting in the streets, but since 90% or more of this literally country has no clue, it’s merrily back to watching “American Idol” they go.

    I’m convinced that this phenomenon is the result of our decaying culture and educational system. The chickens are finally coming home to roost, folks.

  10. TRW commented on Sep 5

    The only reason to consider a bail out is to control systemic risk. So with that in mind, I think you dole out the “haircuts” this way:
    Equity/Stock – 100%
    Bonds – 0%
    Preferreds – 0% or as close to that as you have to be to prevent the banking system from seizing up (or maybe a hybrid approach that includes a time component).
    The equity/stock is what it is-ownership interest in a failed enterprise. But worrying about issues like moral hazard relative to the debt instruments is missing the big picture (pun intended…). There are going to be a lot fewer of us with jobs and money to manage if the US clips everyone in the world on the GSE debt instruments. Normally I would favor flushing all of it like it deserves. But the risks to the whole system outweigh the benefits of a traditional capitalist solution.

  11. Vermont Trader commented on Sep 5

    It makes me so pissed off.

    He wants the US taxpayer to take out a loan to buy our own loans?

    He gets the cash and gets to reinvest it and earn interest.

    We get to pay twice the interest on our mortgages and the government debt?

    Someone needs to punch him.

  12. Dale commented on Sep 5

    Since PIMCO bought all of the GSE paper for it’s “implicit” wink-wink Government guarantee then surely they won’t mind if it all gets paid off at the comparable US Treasury Rate. After-all safe investments usually pay diddly in interest…

  13. Mark E Hoffer commented on Sep 5

    TRW,

    The “System” Is the Risk. The name of the Game is, in fact, “Bailout”.

    We’ve, for too long, been Socializing the Risk that bred the Private Gains.

    We’re going have to pay the Piper sooner or later. We’d be better off with sooner, while there’s still some meat left on the Carcass.

  14. Jeff M. commented on Sep 5

    @TRW: I don’t necessarily disagree with you but what’s to stop this from happening again if people like Gross know that they can just load up on this crap and the government will make them whole every time there’s danger they will lose. The only premise that Gross loaded up on this garbage is because he knew he’d bet bailed out if they went bad. That’s NOT the “free markets”. This is reckless behavior that should NOT be rewarded. That is RIGGING the game. Am I being naive here? Our whole system is bullshit if they do this over and over and over again. That’s the cynical part of this – Gross knows that and he’s capitalizing on that. Who’s going to make ME whole on my bad investments? [crickets chirping………] I thought so. This is just welfare for the rich but most people are just too stupid and lazy to figure it out. As we’ve seen this past week, a good half of this country seems to not care about facts or reality. Let’s just continue merry sunny optimism of Reagan with our heads up our asses while the whole thing just falls apart.

  15. Bully commented on Sep 5

    Funny how the guys that ARE the “system” are always screaming about the risk to the system.
    What B.S.
    Banks and brokers and pools of speculative capital have been failing since the beginning of trading.
    Saving the weak or the foolish is like letting the ram that lost the fight sire the herd.
    DB

  16. Francois commented on Sep 5

    Bill,

    If you didn’t hedged your bets in this kind of market environment, you deserve all the losses that are coming at you.

    Wanna bailout? Alright, but with the proviso that everyone (yes buster! that includes YOU) takes a painful flesh cut.

    Sucks no?

    It’s called risk. Ignore it at your own peril.

  17. bdg123 commented on Sep 5

    Bill needs to relax and smoke a fatty. I’m tired of this incessant whining by these rich MF’ers that created this mess. I’ll tell you what, if we get someone really serious about reform in the White House, the shit is really going to hit the fan as not only the state AG’s but “THE” AG revs up his or her engine.

  18. johnnyvee commented on Sep 5

    Its interesting that Good ole Al Greenspan was recently hired as a consultant for PIMCO.

  19. Donkei commented on Sep 5

    I like what James Carville observed about the bond markets–that it was bullshit what everyone said about not pissing off the bond markets.

    Bill Gross can go to hell. I hope whomever is the next President just tells him to come on over to the White House barber for a free haircut. You made your bets and you lose, and it’s not the taxpayer’s fault you don’t understand risk.

    BTW: Vermont Trader–I’d happily buy your mortgage at 90 cents on the dollar. Even if you are some guy in a basement (me, the attic) I’m sure I’d get paid back. I wouldn’t lend Frannie a penny, though.

  20. Mattie commented on Sep 5

    gosh… the titanic is sinking.

    oh well… we have the 2008 PREZ-PICK to go back to… in one corner we have the great speaker, Author-Senator, who’s Harvard-educated (like Bush) from Chicago and the other corner War-Vet Senator from ???, brought to us by the same people that picked us that G.W.Bush… can we trust either will do a good job???

    I would prefer if China just called in the loan… they do put on a good show. And we can all just get along with one party, no religion and less chaos.

  21. DL commented on Sep 5

    I wonder how many investment firms are out there – – in the same position as PIMCO – – which have made “campaign contributions” to Obama and McCain with the expectation of a bailout.

  22. CaptiousNut commented on Sep 5

    Just to keep the record straight, I advocated *punching* Bill Gross year ago.

    He was never anything BUT slime.

    His conflict of interest, esp. with CNBC, is so flagrant, so over-the-top criminal.

  23. JohnB commented on Sep 5

    Didn’t this cow leave the barn already?

    PIMCO’s MBS is backed by Fred and Fan and Ginnie. In July of 2008, the Feds backed Fan and Fred. Ginnie is already part of the Feds. So PIMCO’s MBS is already 100% guaranteed by the Feds, yes?

    The only point that Gross is making is that every day the Feds delay their already promised bailout, it hurts the economy and the debt markets and the financial system.

    Sounds reasonable to me.

    Talk of bailouts and moral hazard do not seem to apply in this set of circumstances. The sequencing is all wrong. You need a little situational awareness.

    Try this: PIMCO owns MBS, not Fan and Fred debt. The MBS gets no haircut. Period.

    The promise has already been made. Gross is only asking that the Feds deliver on the promise in a prompt manner.

    And he makes a good case… prompt resolution of this matter avoids a downward spiral in all asset values that WILL impact the economy in a very severe way. If the Feds are going to bail, they should do it now. Due to his personal ideology, Paulson wants to wait so that he can inflict maximum damage on Fan and Fred. Gross thinks there are larger considerations of harm that take priority over Paulson’s desire to delay the bailout. And THAT was the point of his two-pager.

    Besides, PIMCO is a very large once and future customer of the Feds. This gives them (and not BR) the right to say whatever they want, and be listened to attentively by the powers that be in Washington.

    And by the way, the Feds are not on the hook for 5 or 6 trillion dollars. The shareholders and bondholders of Fan and Fred are, along with the homeowners. Several brokerage firms came out with research this week that said the cost to the Feds would be incredibly low. you can argue the point with the brokers, but you can’t make a claim that the loss to the taxpayers would be significant.

  24. Winston Munn commented on Sep 5

    Gross said. “If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.”

    Of course, Bill. The answer to the problems of any Ponzi Scheme is simply to find another sucker.

    But here’s the killer – the answer is always only temporary.

  25. VennData commented on Sep 5

    While the GSE’s bond portfolios grew, the Bill Grosses of the world sold them hedges which comforted the politically-appointed morons who “ran” them. These hedges also helped PIMCO (and other smart money groups) to slightly outperform your typical bond fund.

    To think that PIMCO has made a big one-way bet on GSE paper is silly. To think that the US is going to let the GSE’s default on their debt is silly. So….

    …PIMCO’s talking their book in that all Gross et al are asking for is for the credit markets to start trading again.

    The Bush administration wants to kick this can down the road. They do not want another nationalization-looking bailout on their watch. Bill Gross doesn’t care about Bush’s record and wants the market to start working now. He’s doing it by applying pressure to Paulson who hopes to return to finance one day. What’s wrong with that?

    It’s not the first time politicians let things in the country go to heck to satisfy some narrow self interest. It won’t be the last.

  26. Kirk commented on Sep 5

    From Jeff M.:

    “As we’ve seen this past week, a good half of this country seems to not care about facts or reality. Let’s just continue merry sunny optimism of Reagan with our heads up our asses while the whole thing just falls apart.”

    – – – – – –

    Psst…you may want to look into who Billy Grossy’s man is for President…The Big B himself!

    I will agree with one thing…Grossy baby is a LEFTIST who is looking for a Socialist solution to the ridiculous situation we find ourselves in. It is a LEFTIST solution after all.

    The way to SOLVE this would be to MAKE DAMN sure people lose BIG. Big people like Billy Boy. But you see Billy Boy is counting on one thing…his gun pointed at the US consumer’s head (US TAXPAYER) is bigger than the gun of the market pointed at Billy’s head. Picture it…straight from a bad 1970’s cop show. I’ll shoot! I swear I shoot!

    Well…Paulson…do you feel lucky? Well do ya?

  27. Robert Muncy commented on Sep 5

    Might one suggest that Bill and others know somethings we dont, IE the losses are worse than shown or that the accounting tricks are not going to work when the bank is empty.
    I call it panic and nothing else. His tone is that of the last man left without a spot on the titanic asking for a lifevest.
    you aint going to get one

  28. larster commented on Sep 5

    This a classic damned if you do, damned if you don’t scenario. Someone is going to take a bath here, the question is who. My feeling is the the Fed should screw Pimco, as that only gives the bath to those that hold Pimco funds. Otherwise, we all take the bath by bailing out Pimco’s bad decision to load up on Fannie/Freddie paper. Either way is bad news but that is the name of the game in this crisis. No way out!

  29. Eric Davis commented on Sep 5

    Wierd wasn’t it? Sounds like Pimco is getting to capitulation/aversion… Or just crazy talk.

    Gross likes “the lightning round”, I’m with you kids… Armageddon abounds.

  30. VJ commented on Sep 5

    THE KOOL-AID SALESPERSON OF THE WEEK

    Abby Joseph Cohen, President of Global Markets Institute at Goldman Sachs:

    * “First of all, the economic data, while are not good, we think are already priced into the stock market.”

    * “The economy is growing a little more rapidly overall than many people had feared because of strength in exports, technology and so on.”

    * “The most recent data make it very clear that there are many different real estate markets within the United States, and in many of them, prices seem to be flattening out somewhat.”

    (She expects the S&P 500 to rise nearly 10 percent between now and the end of the year)

    09.03.08

    TRANSCRIPT

    .

  31. Scott in Chicago commented on Sep 5

    It has certainly been said before, but: The American definition of Free Market Capitalism is “Privatize profits and Socialize losses.” Which of course encourages insane risk levels. Screw it! Let the chips fall. Let Bill Gross struggle to pay for his next face-lift. If they take big losses, it’s because they fucked up. That’s actually okay.

    Livin’ la Vida Kudlow,
    Scott in Chicago

  32. Doug commented on Sep 5

    I think this story on Chinese sentiment is part of it too.
    http://www.nytimes.com/2008/09/05/business/worldbusiness/05yuan.html?_r=1&ref=business&oref=slogin

    Basically there are people in China who are questioning more and more the Chinese central bank’s subsidy of the United States. Further pressure on the value of their holdings could cross the tipping point.

    Also what would it mean for fnm and fre to start actually trading at cut rate prices? If those bonds start yielding double digits, what signal is that? Traders start wondering about the huge size of the spread against treasuries and the maybe the convergence ought to come from cheaper treasuries. If you get a spillover into the treasury market then every other bond priced against the treasury curve is suddenly cheap and borrowing costs go up.

    Right now you have people and foreign government lending the treasury money at negative real interest rates. El Erian in his book pointed out that everyone at PIMCO knows that is an unsustainable situation that would eventually break down, but as long as it exists you work with it. It sounds like they are now worried the situation is going to right itself as a tsunami rather than the tide gradually coming in.

  33. scorpio commented on Sep 5

    Pimco is freaking about the $250 B of FNM and FRE debt coming due 9/30

  34. CNBC Sucks commented on Sep 5

    Well, three things come to mind here:

    1) 100% haircut for stockholders, Barry!? I take it you are not a Republican. Don’t you know, corporate socialism is the new capitalism?

    2) Thanks, RJ, for the bit on McCulley, who I still maintain is either related to John Bolton or may even be John Bolton.

    3) I find it ironic that all of you are worrying about the implosion of financial markets while I was reading about how the tanning-booth-and-community-college Vice Presidential candidate has become even more popular among the American people than Columbia and Harvard Law superstar Barack Obama. I can’t wait to see somebody try to explain a credit spread to her. I guess a Main Street that has become too poor, too uneducated, and too occupied with triviality to make the right decisions about our nation’s leadership will, in the end, be not good for Wall Street.

  35. leftback commented on Sep 5

    Let’s think this through, in a twisted kind of way..?

    Let’s say that you, Billy Boy, own a stinking pile of dog poop (agency paper), and you’d like to own more Treasuries and less dog poop, because your knowledge of dogs leads you to suspect that they will tend to produce a lot more poop over time, and that the market for poop may be soft, going forward.

    It’s possible that you might propose a bailout of Dog Poop Corp (Fannie and Freddie) with Treasury money, knowing that this might induce some investors to sell Treasuries and buy stock in DPC, possibly reducing the spreads on dog poop paper, while at the same time making Treasuries cheaper for you to buy. If successful, this would enable you to alter your asset mix in the direction of higher quality.

    Anyone got an idea of when the $ will turn? We seem to be alternating deflation epochs (July-present: stocks down, yields down, gold/oil down, $ up) with inflation epochs (November-June: gold/oil up, yields up, $ down). The Euro has been battered senseless – surely time for a short-term counter-trend?

  36. Namazu commented on Sep 5

    From what I saw on CramerNBC a few moments ago, the boys from Valley Forge would be happy to help administer PIMPCO (nice one, Mark!) their haircut. And going forward, PIMCO would be well-served by deploying Mr. El-Erian as the public face of the company, and relegating Buffalo Bill’s loony essays to a dark corner of the Web site.

  37. nl commented on Sep 5

    I agree with Bill Gross. People who are making fun of him are still in denial. The government is going to backstop the banking system to the tune of trillions of dollars — via both debt and equity. This is not unusual. Britain, Sweden, Norway, Mexico, Brazil, Japan, Korea and others have been down this path, and for the most part it worked out OK. For some reason, Americans think they are immune to significant financial problems. Better get over it quick.

    Frannie is just the start. There’s likely to be a government-managed liquidation of Washington Mutual, Wachovia, and another dozen or so smaller operations. I figure the US government will issue about $3 trillion in debt to handle it all, possibly by the end of next year.

  38. Jeff M. commented on Sep 5

    @Kirk: Who the fuck cares who Bill Gross backs? Talk about a distraction from the real point. Do you think that the GOP elite are ANY different?

  39. Che Guevara commented on Sep 5

    I am long the American Peso!

    Viva hyperinflation! Viva La Revolutione!

  40. DL commented on Sep 5

    VJ @ 2:02:32 PM

    Her idea of a defensive posture is 98% stocks, 2% cash.

  41. scorpio commented on Sep 5

    agricultural commodities plummeting, DBA scorched, who’s liquidating?

  42. karen commented on Sep 5

    leftback, i think we we see the dollar resume it’s decline when the GSEs are back-stopped (and Bill gets his way) or LEH/WM/GM get bailed out.

    I think the Fed finally figured out the dollar could/would go into a freefall if they didn’t pullback a bit. Circumstances will dictate another helicopter drop soon.

    I’ve recently gone back to George Soros’s latest book, and it’s a darn good play-by-play to date.

  43. AHodge commented on Sep 5

    It is breath taking cheek to lecture the Govt on how they “must” bail Pimco and his cohorts out AKA “opening up the balance sheet of the US Treasury”, AND announce a new $5 billion distressed mortage paper fund that will only work with a bailout.
    Perversely, (not really) the paper owning crowd would actually like to stir up a crisis now and get stage two of the fix in their favor before the election. They know with free money at the window for FF, this will otherwise string out for the year’s term of the legislation. Then their NOT TEMPORARY problem will be back and the public will at least dimly see the size of the bill.

    I would like to know the valuation of the 61% mortages in his Total Return Fund, said to have gained a league leading 9.8 % last year. No doubt they are “impeccable” credit (with a bailout) carried at near book value. Dont be the last one to sell.

    He started out in casinos, Now he has bet the PIMCO ranch on a bailout. That would need to be a 100% taxpayer bailout. IF holders were bailed with a haircut he would still be hurting. You wont ever hear him discuss that. If enough people can yell “fire” and “too big to fail” no one will think about whether Fannie and freddie can 5% “fail” and save the taxpayers $100 billion. . this stuff never was worth what it was booked for. Glad to see most of this crowd gets that haircuts are needed

  44. Rubens Morse commented on Sep 5

    I can feel some of envy of the portfolio manager who has been able to consistently beat the market year after year. According to Morningstar he’s performed 2% p.a. better than the average fund in the category over the last 5 years, despite its $130 billion size…

  45. leftback commented on Sep 5

    @Karen said:

    “i think we we see the dollar resume it’s decline when the GSEs are back-stopped (and Bill gets his way) or LEH/WM/GM get bailed out.”

    – Right on cue, perhaps?

    http://www.bloomberg.com/apps/news?
    pid=20601087&sid=aXDsHFR9jkxo&refer=home

    Not sure if there is any substance to this but there was indeed a big sell off in Treasuries from this morning when we hit 2.09 on the 2-year for a short while. I’ve been unloading some, it was a good week to be long bonds and short stocks.

    Does WM get bailed out? I guess Northern Rock did. Does GM get bailed out? I guess British Leyland did, innumerable times in the 1970s, 1980s…. It’s odd for me to see the US go down this road. I am a liberal but corporate socialism is not my cup of tea.

    Thanks for the reference, I will take a look at Soros’ book. He has already seen a few meltdowns so I am sure he has some good insights. I bet he was short GBP this week.

  46. anon commented on Sep 5

    Gross is a horrifically bad writer, and getting worse.

    And he may be cracking up under the pressure. That’s what’s wrong (it’s happened before).

  47. Brian commented on Sep 5

    These people made tons of money on the way up and now they want to socialize their losses by stealing from the taxpayers. 100% haircuts for them all, especially Gross.

  48. mino2126 commented on Sep 5

    This is classic!!! I interviewed with them about 7 months ago in Newport, beautiful offices, and during the interview they asked about RMBS. I can’t remember the direct question but my response was that GSE securities are not guaranteed by the US Govt. They laughed at me…but I guess I might get the last laugh…hahahaha

  49. km88 commented on Sep 5

    CNBC Sucks…spoken like a true elitist.

  50. George Bailey commented on Sep 5

    You’ve all seen “It’s a Wonderful Life” of course….This is essentially the opposite. Instead of the masses all getting theirs, its a few rich guys dictating policy, all in to avoid an “economic tsunami”…Well, i’m here to tell you its here, and if the baloon we created in 01 doesn’t deflate now, get ready for a real…ah….windy day…

  51. TheMoney’sinBGross’spocketdawg! commented on Sep 5

    The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    CHARLIE: I’ll take mine now.

    GEORGE: No, but you . . . you . . . you’re thinking of this place all wrong. As if I had the money
    back in a safe. The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    . . . right next to yours. And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others.
    Why, you’re lending them the money to build, and then, they’re
    going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?

  52. TheMoney’sinBGross’spocketdawg! commented on Sep 5

    The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    CHARLIE: I’ll take mine now.

    GEORGE: No, but you . . . you . . . you’re thinking of this place all wrong. As if I had the money
    back in a safe. The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    . . . right next to yours. And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others.
    Why, you’re lending them the money to build, and then, they’re
    going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?

  53. TheMoney’sinBGross’spocketdawg! commented on Sep 5

    The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    CHARLIE: I’ll take mine now.

    GEORGE: No, but you . . . you . . . you’re thinking of this place all wrong. As if I had the money
    back in a safe. The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    . . . right next to yours. And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others.
    Why, you’re lending them the money to build, and then, they’re
    going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?

  54. TheMoney’sinBGross’spocketdawg! commented on Sep 5

    The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    CHARLIE: I’ll take mine now.

    GEORGE: No, but you . . . you . . . you’re thinking of this place all wrong. As if I had the money
    back in a safe. The money’s not here. Your money’s in Joe’s
    house . . .
    (to one of the men)
    . . . right next to yours. And in the Kennedy house, and Mrs. Macklin’s house, and a hundred others.
    Why, you’re lending them the money to build, and then, they’re
    going to pay it back to you as best they can. Now what are you going to do? Foreclose on them?

  55. oldman commented on Sep 6

    If there’s a bail out, who will be next?
    GM, GMAC come to mind.

  56. 2lose1shirt commented on Sep 10

    We’re all in this mess flipping money at our own risk. Why should the Joneses pack up and move out and not the P-firm? Don’t worry about a thing, debt will always be allocated to a new owner free of charge to the taxpayers in which is the only one filling the gaps with plenty.

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