Comments on: Why Bill Gross’s mistake is excusable http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traducere romana daneza http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-53768 Mon, 29 Sep 2014 14:06:15 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-53768 This is very interesting, You’re a very skilled blogger. I’ve joined your rss feed and look forward to seeking more of your excellent post. Also, I have shared your web site in my social networks!

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By: kritik1 http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30561 Tue, 06 Sep 2011 01:11:19 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30561 Both short-term maturity bonds and long-term maturity bonds are out of favor as the economy presently stagnates. The result both the value and the yield is down.

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By: dedalus http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30430 Fri, 02 Sep 2011 00:23:44 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30430 I’m with Auros, opposed to Felix.

Gross is to be criticized not merely for making a trade that proved to be a huge loser, but because his model of how the world works is/was much less-good than others\'(like Krugman’s), which he dismissed in favor of his own pet-theory.

Invest with Gross and you’re long “the conventional wisdom” — as if that were something worth paying for instead of reading about in the pages of Barrons Roundtable & elsewhere.

I don’t understand why bloggers & the MSM adore Bill Gross when I think he’s a bully who narrowly eluded serious reputational & criminal charges:

http://www.bloomberg.com/news/2010-12-30  /pimco-to-pay-92-million-to-settle-futu res-lawsuit.html

Gross’ dasein (his way of ‘being in the world’) will eventually undo him: he’ll be spectacularly wrong again and/or unable to beat the next criminal rap. His mentalité is not worth paying a premium for. Sell BG.

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By: jesse1 http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30413 Thu, 01 Sep 2011 19:52:24 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30413 “Gross worried that the models and historical precedent would be superceded by unusual market psychology”

Gross was in effect making a bet against what a particular model predicted was going to happen. There are two things Gross could have done here: admitted he and his team didn’t understand the macro situation properly, or simply state that his predicted outcome _could_ have plausibly happened due to irrationality, madness, or whatever and he just lost the bet this time. Gross is rightly introspective but it doesn’t mean Krugman was “right”, only that the Hicks model — amongst others — worked rather well ex post and Gross should ask his advisory team about that.

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By: fixedincome http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30408 Thu, 01 Sep 2011 18:28:37 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30408 Oh, and by the way – nobody (but a very, very few)running a diversified bond portfolio wanted to own TSY at 2.X%, even with the risk of a rally.

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By: fixedincome http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30407 Thu, 01 Sep 2011 18:11:54 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30407 The notion put forth by Krugman that Gross was simply and foolishly wrong because he ignored the basic logic of a model (IS-LM in this case) is itself a form of hubris.

Gross didn’t screw this up because he didn’t understand the economics or how bonds trade. He gets them just fine. (And jesse1, Krugman’s right that McCulley WAS a big loss, but Gross has got more than a few insanely sharp macro guys at his disposal…)

The “problem” was that, whether you think it foolish or not, Gross worried that the models and historical precedent would be superceded by unusual market psychology, and that…this time would be different. I’m not going to try and describe that in fine detail, but I think most of you probably know what I mean (?)

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By: TFF http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30402 Thu, 01 Sep 2011 17:01:39 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30402 “It’s a bond fund and will be measured relative to other bond funds.”

Too bad… Because as Finster stated, the bond market right now is irrational, and being driven by forces that are not concerned with investment returns.

To me this is akin to observing in 1998-1999 that the tech stocks were irrationally valued. If you had gone short on the Nasdaq in January 1999 at 2500, you could have made a heck of a lot of money by the end of 2002 — but you would have faced massive margin calls in early 2000 as the index topped 5000.

Comparing your investment returns to the market is not always wise. It is unrealistic to expect to participate in a frothy rally yet still escape the bursting of the bubble unscathed. Better to sit out both sides of that market.

It is only a mistake if Gross reverses himself now.

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By: jesse1 http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30397 Thu, 01 Sep 2011 15:34:33 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30397 “Does Gross have the option of moving into other asset classes?”

It’s a bond fund and will be measured relative to other bond funds. He can produce guidance with those optics but people don’t invest with Gross for his knowledge of small cap mining stocks.

The guy is paid to know the bond market and he is ruing his recent judgement. That shows incredible gall but I don’t yet see what he’s doing about it. Perhaps he’s off to Princeton for tea and crumpets?

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By: TFF http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30391 Thu, 01 Sep 2011 12:34:07 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30391 “These players are not interested in a return on their investment and yet are the biggest buyers standing right next to you at any auction.”

…which is why sane investors should shun bonds at this point.

Does Gross have the option of moving into other asset classes? Dividend stocks have done pretty well recently.

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By: Finster http://blogs.reuters.com/felix-salmon/2011/08/31/why-bill-grosss-mistake-is-excusable/comment-page-1/#comment-30389 Thu, 01 Sep 2011 10:05:33 +0000 http://blogs.reuters.com/felix-salmon/?p=9659#comment-30389 Seanmatthews. Krugman is brilliant, but no John Maynard Keynes. Keynes would have speculated on it and also delivered his judgement in a much more arrogant fashion.

I think Gross mistake falls into the ‘market can stay irrational longer than you can remain solvent’ category. When tradebalance oriented players like the PBoC and the Fed as extended arm of the US are in the market with unlimited funds, then price discovery will not work as expected. These players are not interested in a return on their investment and yet are the biggest buyers standing right next to you at any auction. Short term bidding up their quary or buying ahead of them may make sense. Long term you will end up with their intended return. Zero or negative. That is the stated mission for your competitors.

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