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from Unstructured Finance:
Obama hearts El-Erian
By Sam Forgione and Matthew Goldstein
OK, so it's not a big gig like being nominated to head the Treasury Dept. But President Obama's decision to tap PIMCO's Mohamed El-Erian to head the President's Global Development Council is no insignificant matter.
As the co-chief investment officer of the giant bond shop founded by Bill Gross, El-Erian is seen as the eventual heir apparent to run the Newport Beach, Calif firm. And El-Erian increasingly has become one of PIMCO's most visible faces---maybe even more than Gross himself these days--when it comes to talking about what ails the U.S. and global economies.
The assignment is another indication of PIMCO's growing ties to the Washington establishment, something that has developed as the firm has grown to manage $1.92trillion in assets and played a starring role along with BlackRock in helping to manage some of the financial crisis rescue programs. (For more see the Special Report that Jenn Ablan led earlier this year on Gross and his empire, Twilight of the Bond King).
The job, in which El-Erian will serve as chairman, also is one more example of Obama's outreach to the financial and business communities in the wake of his re-election. In the wake of his victory, Obama seems to be going out of his way to dispel the views that he pays no heed to what Wall Street or the business community thinks.
from MuniLand:
The fiscal cliff and “budgetary crystal meth”
Want to scare yourself a little? Bill Gross, who runs one of the world’s largest bond mutual funds, says that U.S. Treasuries are losing their status as the top global asset. Bloomberg has the story (emphasis mine):
Gross wrote in his monthly investment commentary last week that the U.S. will no longer be the first destination of global capital in search of safe returns unless fiscal spending and debt growth slows, saying the nation “frequently pleasures itself with budgetary crystal meth.”
from Unstructured Finance:
Gundlach doesn’t whine over his stolen wine
By Jennifer Ablan and Matthew Goldstein
Who said bonds are boring? In recent days, Jeffrey Gundlach, the new king of the fixed-income world, has been dominating headlines with his lengthy CNBC interview on everything from counterparty risk to the market’s love affair with Apple stock to talk in the blogosphere about Gundlach’s pricey Santa Monica, Calif. residence being burglarized of more than $10 million in assets.
Against this backdrop, Gundlach’s firm, DoubleLine, hit a huge milestone this week as well, hitting $45 billion in assets under management.
from Bethany McLean:
The Pension Destabilization Act
From the wonder of the Olympics to the horror of Libor, there’s been plenty of news this summer. So maybe it’s not surprising that a 1,676-page bill called Moving Ahead for Progress in the 21st Century, which President Obama signed into law on July 6, has escaped attention. (Really? You’d rather watch Gabby Douglas win the all-around gold than read this bill? Shocking.) But buried within the bill, which is also known as the Highway Act, is a provision that matters to many Americans, a provision that sums up a lot of what’s wrong with Washington today, a provision that is not just bad finance but also reeks of the cronyism we should all fear.
The provision is called the Pension Stabilization Act, and really, it should be renamed the Pension Destabilization Act. Pensions are fairly unstable already, relying on markets of the future that smart prognosticators doubt are going to be as generous as the markets of the past. And yet, many pension plans are counting on similar rates of return anyway. In his August letter, Pimco’s Bill Gross pointed out that one of the country’s largest state pension funds says it will earn what sounds like a modest real rate of 4.75 percent. But as Gross notes, assuming a portion of that is in bonds yielding 1 to 2 percent, the pension would need stocks to return 7 to 8 percent after adjusting for inflation to hit its target. That is, as Gross writes, “very heavy lifting.” Nor are we heading into tough times with a cushion. Different sources put the funding deficit for large corporate pension plans at somewhere between $475 billion and $500 billion as of the end of 2011.
from Unstructured Finance:
UF Weekend reads – The PIMCO edition
Jenn Ablan likes to tell me that people are always writing about PIMCO and Bill Gross, the long reigning "king of bonds." And when you think of it there's a lot of truth to that assertion.
Gross' mammoth $263 billion Total Return Fund gets endless coverage because--by its very size--it really is the bond market. It's one reason why so much ink is spilled whenever the Total Return Fund has a month where investors pull more money out of the fund than put in. And it's why there's so much analysis of what Gross & Co. are doing with Treasuries and mortgage-backed securities--and whether they are using lots of leverage and derivatives to boost exposures.
from Unstructured Finance:
PIMCO and BlackRock go strolling down K Street
By Jennifer Ablan and Matthew Goldstein
Wall Street may hate financial regulatory reform, but lobbyists certainly love it—especially ones working on behalf of giant asset managers PIMCO and BlackRock, which control a total of nearly $5 trillion in assets.
Last year, PIMCO and BlackRock both upped their lobbying expenditures in a big way.
from Unstructured Finance:
Paul after PIMCO
By Jennifer Ablan and Matthew Goldstein
Paul McCulley says working at bond giant PIMCO was like being in Camelot. But in some ways, Bill Gross’s former top Federal Reserve watcher seems a lot happier and more at peace with himself since leaving the Newport Beach, Calif.-based firm at the end of 2010.
These days McCulley, who is credited with coining the phrase “shadow banking” to describe the role Wall Street banks and hedge funds play in pumping liquidity into the financial system, looks more like a professor at some liberal arts college than a once mighty money manager of some $50 billion.
from Unstructured Finance:
Gross miscalculation?
By Jennifer Ablan and Matthew Goldstein
It appears that Bill Gross's PIMCO Total Return Fund is losing ground with investors -- just not as fast as we originally thought.
Morningstar, the mutual-fund tracker, initially told us that PIMCO's flagship fund had suffered $17 billion in net outflows over the last 12 months. It turns out Morningstar discovered this morning that it miscalculated and the figure actually is $10.3 billion.
from MediaFile:
Another day, another social network: Bill Gross chimes in
How many social networks does the world need?
Bill Gross, the man credited with pioneering the search advertising business, believes there’s room for one more.
On Monday, Gross’ Ubermedia unveiled Chime.in, a social media “platform organized around interests.”
from Newsmaker:
Getting to know co-founder of Pimco Bill Gross
Bill Gross, co-founder of investment giant PIMCO, is one of the world's most influential figures when it comes to the bond market, managing $1.2 trillion in securities. His investment decisions have often lead to excellent results for his clients and helped turn his $236 billion Total Return fund into the world's largest bond fund.
During the 2008 subprime mortgage crisis when many big investors were reeling from deep losses, Gross made a bet to go long on Fannie and Freddie bonds, and was one of the first to predict the agency-backed mortgage lenders would get a government bailout. This decision lead to a $1.7 billion payout for his fund.
