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from Unstructured Finance:

‘Bond King’ Gross speaks to 700 at Pimco client event in Big Apple

By Jennifer Ablan

Bill Gross did something last week he rarely does -- venture from his Newport Beach, Calif. home to meet with investors twice. 

First in Chicago at the Morningstar Investment Conference where he made waves for donning sunglasses and joking he'd become "a 70-year-old version of Justin Bieber," and then, the next day at a less-publicized event for 700 clients in New York City. 

The meetings are a sign that Gross, dubbed the market's "Bond King," is trying to make amends with investors and the media after a brutal first half of the year. 

Last Friday, Gross gave a keynote address and took some questions at Pimco's annual investment summit in the Big Apple, which was the largest Pimco-hosted client event in its history with over 700 institutional investors and clients, Doug Hodge, ceo of Pacific Investment Management Co. told Reuters.
At Friday's event, Hodge spoke reverentially about Gross, describing him in visionary language one might reserve for a great inventor or artist.
"Time after time, Bill has broken with conventional wisdom as he has seen opportunities where others have not, and he has been prepared to put it on the line, over and over again, and it has been this process of taking measured risk that has led to extraordinary long-term benefits to you, our clients," Hodge said.
Gross is facing no shortage of investor attention.
Pimco's flagship Total Return Fund, the world's largest bond fund run by Gross with $229 billion in assets under management, saw net outflows totaling $15.67 billion for the year-to-date ending May and subpar performance.
Gross, co-founder of Newport Beach, California-based Pimco, has also been under intense scrutiny since his public falling out with El-Erian and news reports about Gross's demanding and sometimes abrasive management style.
But for its part, Gross's performance at his Pimco Total Return Fund is showing some signs of stabilization.
In the 12 months ending last Friday, the Pimco Total Return Fund, which has $229 billion in assets under management, is now beating its benchmark Barclays U.S. Aggregate Bond Index by 32 basis points, Hodge pointed out.
"At the end of the day, Pimco and Bill Gross should be judged by the value that we deliver to our clients. That's the test," Hodge told Reuters in an interview. "Through the Total Return Fund and other strategies, Bill has created more value for more investors than anyone in the history of our industry."
The half-day summit on Friday featured Gross but also showcased Pimco's new deputy chief investment officers and Rich Clarida, Pimco's global strategic advisor.
After the client event, Gross also did a town hall meeting with employees in Pimco's offices, which was also attended by several hundreds of personnel, a Pimco spokesman said. Pimco declined to comment on what Gross discussed at Friday's client and employee events.
While many say Gross appears more engaged with colleagues, some institutional investors are still waiting for a turnaround in his performance.
The Pimco Total Return Fund's three-year Sharpe ratio – a measure closely followed by pension funds, foundations and endowments -- is hovering around 1.02. That is trailing the Barclays Aggregate at 1.24 and the average intermediate-term bond fund category at 1.26 (The higher a fund's Sharpe ratio, the better a fund's returns have been relative to the risk it has taken on).
Hodge added: "Generating alpha is more than simply buying and selling bonds, it is about breaking with conventional wisdom and ultimately about putting yourself on the line."

from Breakingviews:

When denials can be as instructive as the truth

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Denials can be as instructive as truths – and if not, they can be at least more entertaining. On Thursday a fellow fingered as the father of bitcoin rejected a report he founded the crypto-currency. In the shadowy world of virtual money, such confusion may not be so surprising – nor matter. Not so with the bizarre defiance of $2 trillion “Bond King” Bill Gross.

from Unstructured Finance:

Jim Chanos and the bears come out of hibernation

By Matthew Goldstein 

The year is young, but so far its been a rough one for bearish stock investors with the S&P 500 is up 7.25% The surge in equity prices has left  a lot of short sellers--traders who bet on a stock sliding in value--with glum looks on their faces. And it's with that bullish backdrop that several dozen of Jim Chanos' closest friends gather in Miami for the noted short seller's annual meeting of the bears.

The gathering of 40 or so people from Wednesday through Friday is a chance for Chanos and other like minded investors to kick around their best short ideas. A year ago, there was a lot of talk about shorting companies in the natural gas space.

from Anatole Kaletsky:

2013: When economic optimism will finally be vindicated

Will the world economy be in better shape in 2013 than 2012? The Economist asked me to debate this question with Mohamed El-Erian, chief executive officer of PIMCO, the world’s biggest bond fund. El-Erian is the author of When Markets Collide, a brilliant book that coined the term “New Normal” to describe the world’s inevitable descent into a Japanese-style era of stagnation after the 2008 financial crisis. I was delighted by the invitation because I wrote a book at about the same time, taking a very different view of the crisis – and many of my predictions finally look like they will be realized in 2013.

In Capitalism 4.0, I argued that the crisis would create a new model of global capitalism, one based neither on the blind faith in market forces that followed the Great Inflation of the 1970s nor on the excessive government intervention inspired by the Great Depression of the 1930s. While this new species of capitalism would doubtless go through a painful period of evolution, its character would be fundamentally optimistic because it would be driven by four historic transformations. Those transformations helped trigger the 2008 crisis, but their roots are in the demolition of the Berlin Wall in 1989.

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.

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 Expert Zone:

Egypt’s unfinished revolution will succeed

By Mohamed A. El-Erian

(The views expressed in this column are the author's own and do not represent those of Reuters)

NEWPORT BEACH - A year ago, Egyptians of all ages and religions took to the streets and, in just 18 days of relatively peaceful protests, removed a regime that had ruled over them with an iron fist for 30 years. Empowered by an impressive yet leaderless movement – largely of young people – the country’s citizens overcame decades of fear to reclaim a voice in their future.While much has been achieved since those euphoric times, Egypt’s revolution today is, unfortunately, incomplete and imperfect – so much so that some now doubt whether it will fully succeed. I believe that the doubters will be proven wrong.

from Anthony De Rosa:

The Davos Rookie

I'm going to level with you. I have little more than a vague idea of what I've gotten myself into here. An assembly of heads of state, titans of industry, the cliched 1%. I feel a bit like a fish out of water. What on earth is someone like me going to do among these power brokers?

I've got questions, for sure. What, if anything, has been accomplished as a result of the World Economic Forum since its inception? Going by Mohamed El-Erian's assessment, it seems not much. I don't say this out of malice. It seems like a well-intentioned idea to bring together people who have the power to effect change in the world. Nobody is expecting them to solve the euro zone crisis over the course of a week, but have they seized that opportunity because of coming here? I arrive with an open mind but a skeptical pair of eyes.

from Chrystia Freeland:

Watch Chrystia on ABC’s This Week

Yesterday Chrystia sat down with PIMCO CEO Mohamed El-Erian, Washington Post columnist George Will, and former Council of Economic Advisors Chairman Austan Goolsbee on the set of ABC's This Week with Christiane Amanpour. Here's the video of their discussion about the latest developments in the European debt crisis, China's economic slowdown, and other dangers facing the global economy today:

video platformvideo managementvideo solutionsvideo player

Also, be sure to check out El-Erian's op-ed on Europe's crisis that Reuters published today.

from Tales from the Trail:

Washington Extra – Cattle prod

.dowAs market maven Mohamed El-Erian told us today "The medium term has a way of creeping up on you." That's why everyone needs a cattle prod from time to time and today it was Washington's turn to get a goading.

It came in the form of Standard & Poor's decision to slap a negative outlook on America's top-notch credit rating because of Washington's plodding pace on deficit reduction. The White House and Congress need to get in gear and start making meaningful plans to cut the deficit or else be responsible for a dreaded downgrade in debt. The chances? One-in-three over two years.

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