What we have are two theories as why he left Pimco. Krugman suggests Gross getting everything wrong on a 'Treasury bubble' back in 2011 might have had a little something to do with his departure from the fund he himself founded 43 years ago.
"I don’t know anything about what’s been going on internally at Pimco; I just read the same stories as everyone else. I have, however, written a lot about Pimco’s macroeconomic analysis(which drove its bond-investment decisions)."
"The interesting thing is the Pimco was initially a bond bull, based on the correct understanding that deficits don’t crowd out lending when the economy is in a liquidity trap; but it then went off the rails, with Bill Gross insisting that rates would spike when the Fed ended QE2. I tried to explain why this was wrong, and got a lot of flak from people insisting that the great Gross knew more than any ivory-tower academic. But I knew what I was talking about!"
So it wasn't about investment strategy but about 'media strategy.' So if everything was fine on the investment strategy front why fire someone who allegedly hasn't hurt the investment strategy and just happens to be the founder of the firm and whose name is more or less synonymous with the firm? If it's just about media matters? At least there is no problem with investing at the firm. Oh wait:
"The biggest issue at Pimco from a strategy standpoint has been a mass exodus of client money over the past 15 months or so, particularly from the firm's flagship Total Return Fund, which has lost more than $40 billion in all. The $221 billion fund remains the largest bond fund in the world and is still the core of the firm's $1.97 trillion in assets under management."
I mean that kind of does sound like an investing strategy matter. Krugman has weighed in again:
http://krugman.blogs.nytimes.com/2014/09/29/nobody-could-have-predicted-bill-gross-edition/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs®ion=Body
As Pimco clearly has had problems with it's investment strategy, it's a wonder they have time to fire such a household name and the firm's founder to boot over some smaller non-investing matter.
"I don’t know anything about what’s been going on internally at Pimco; I just read the same stories as everyone else. I have, however, written a lot about Pimco’s macroeconomic analysis(which drove its bond-investment decisions)."
"The interesting thing is the Pimco was initially a bond bull, based on the correct understanding that deficits don’t crowd out lending when the economy is in a liquidity trap; but it then went off the rails, with Bill Gross insisting that rates would spike when the Fed ended QE2. I tried to explain why this was wrong, and got a lot of flak from people insisting that the great Gross knew more than any ivory-tower academic. But I knew what I was talking about!"
http://krugman.blogs.nytimes.com/2014/09/27/gross-gone/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs®ion=Body
However, Pimco management is taking pains to insist that while he did indeed leave based on 'philosophical differences' with management these had nothing to do with investing.
"Pimco and its parent firm Allianz moved to stem concern over Bill Gross' surprise exit Friday, assuring investors that the relationship remains solid and they expect client loss to be minimal."
"Officials from the two firms Monday looked to downplay the loss of Gross, who founded the firm 43 years ago."
"Pimco CEO Doug Hodge emphasized that the differences between the two sides were tied to management and media strategy and not to investing. The firm had acknowledged Friday that "fundamental differences" led to the breakup."
"Those differences did not pertain to clients' portfolio investment strategy," Hodge said in a conference call. "Those (nonstrategy issues) were the ones that were broadly at issue with Bill, and, as a result, his decision to resign."
http://www.cnbc.com/id/102041319So it wasn't about investment strategy but about 'media strategy.' So if everything was fine on the investment strategy front why fire someone who allegedly hasn't hurt the investment strategy and just happens to be the founder of the firm and whose name is more or less synonymous with the firm? If it's just about media matters? At least there is no problem with investing at the firm. Oh wait:
"The biggest issue at Pimco from a strategy standpoint has been a mass exodus of client money over the past 15 months or so, particularly from the firm's flagship Total Return Fund, which has lost more than $40 billion in all. The $221 billion fund remains the largest bond fund in the world and is still the core of the firm's $1.97 trillion in assets under management."
I mean that kind of does sound like an investing strategy matter. Krugman has weighed in again:
http://krugman.blogs.nytimes.com/2014/09/29/nobody-could-have-predicted-bill-gross-edition/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs®ion=Body
As Pimco clearly has had problems with it's investment strategy, it's a wonder they have time to fire such a household name and the firm's founder to boot over some smaller non-investing matter.
Well, think of it this way: If Gross was still making pimco a ton of money, do you think they'd be as eager to force him out?
ReplyDeleteIs that you Nanute? Or is this a different Tony?
ReplyDeleteAnyway, you;'re right, if you believe Pimco management they are letting him go even though he's making them a ton of money, which, when you put it into words doesn't sound as likely as it might have when they thought of making that claim.
It seems Krugman's dead on-they have lost a lot of money and standing with his bad bet on a Treasury bubble.