Posts filed under “Fixed Income/Interest Rates”

Bill Gross’s Farewell Letter to PIMCO

Bill Gross, founder of Pimco, and its chief investment officer for the past 40 or so years, resigned last week. Rumor has it that he was but two steps ahead of a mutinous gang, swords out, planning to make him walk the plank. Gross was too quick and before the mutineers could force him, he jumped ship — and landed at Janus Capital. There, we surmise, he was given a slug of equity and a free hand to run a smaller, more nimble fund.

On his way out Pimco, Gross penned a heartfelt farewell letter to his former colleagues. But so great was his haste that he never hit “send.”

Fortunately for you, dear reader, we managed to get our hands on a copy of that e-mail, which we reproduce below and without further comment:


I can add colours to the chameleon,
Change shapes with Proteus for advantages,
And set the murderous Machiavel to school.
-Henry VI, Part III


Dear Friends, Colleagues and Co-workers,

For the past 43 years, Pacific Investment Management Co. has been my home, as well as my pride and joy. With great sadness, I must bid her adieu, not because I want to leave, but because I must. It is the natural order of things for all seasons to change; for the next generation must be given its chance. A new epoch is upon us. Ashes to ashes . . . .

All those reasons — plus truth be told, an imminent palace coup — meant it was time for me to go.

Before I depart, however, I offer you this final Investment Outlook, my last IO for you to consider. No cats, no “Man in the Mirror,” just a few thoughts for you to reflect upon as the next era — a newer new normal — begins.

I co-founded PIMCO in 1971, starting with a mere $12 million in assets. Who could have imagined what the company would become during the ensuing 43 years? After four decades as founder, fund manager and mostly as CIO, I guided this firm to managing more than $1.97 trillion in client assets. When I sold the 70 percent stake not held by Pacific Life Insurance Co. to Allianz SE in 2000, the company had a value of $4.7 billion.

Not too shabby a track record. I daresay I must have gotten one or two things right during that period.

Not that you would know it by the recent press coverage, nor by the whispers in the hallways of Pimco. The immense wealth I helped to create for my colleagues, partners and clients over all that time meant nothing, once Machiavelli’s stratagems were put into play.

There is a standard sequence of events for all insurrections, and this one was no different. It included the favored tactics: A public character assassination, the quiet intimations that I had lost it (erratic behavior, dark glasses at a presentation, an elegy to my cat Bob). Add to that a break with a trusted associate, which implied something nefarious about that behavior (How did Mohamed manage to resign from Pimco, yet stay employed at Allianz? I couldn’t pull that one off).

Continues here




Category: Corporate Management, Fixed Income/Interest Rates

Open Secret of Libor Manipulation

open secretOpen Secret: The Global Banking Conspiracy That Swindled Investors Out of Billions is the new book written by Erin Arvedlund.

The book goes behind the scenes of the elite firms that trafficked in LiBOR based products, including Barclays Capital, UBS, Rabobank, and Citigroup to show the negative impact they had on both ordinary investors and borrowers.

Erin’s claim to fame was a column she wrote in Barron’s in the early 2000s outing Bernie Madoff as a fraud. It was a national bestseller titled Too Good to Be True.

Here is Yahoo:

“LIBOR, the London Interbank Offered Rate, is a global benchmark for interest rates. It’s tied to everything from mortgage rates and student loan rates to complex financial derivatives. And guess what? For a very long time it was rigged.

Now, multiple lawsuits are pending, and that could mean some money back for some investors, traders and consumers.

LIBOR is set each day by a group of bankers, based on estimates of rates at which banks would expect to borrow money from each other. It’s a system built on trust, not math. Regulators were tipped off back in 2007 that banks were fixing rates, and by the summer of 2012, an ugly scandal was revealed. An estimated $300 trillion in financial securities worldwide are based on LIBOR.

Video after the jump . . .

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Category: Books, Fixed Income/Interest Rates, Legal

A World of Sovereign Risk

Interesting interactive graphic from Blackrock:

Source: BlackRock


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Category: Credit, Data Analysis, Economy, Fixed Income/Interest Rates

High Quality Liquid Assets and Munis

HQLA and Munis David Kotok September 8, 2014     High Quality Liquid Assets (HQLA) is a term that now applies to the implementation of the Liquidity Coverage Ratio (LCR) in the Basel III Rule. This highly technical mouthful of acronyms and rules specifically applies to banks, their liquidity requirements and the rules governing the…Read More

Category: Fixed Income/Interest Rates, Think Tank

1981: 20-year Treasury bonds at a 15.78% yield

Today in 1981: Uncle Sam issues new 20-year Treasury bonds at a 15.78% yield, an all-time record-high interest rate for any U.S. government issue. Analysts say they expect that yields will have to go higher “to attract stronger demand.” Yields promptly begin going down, and keep going down for the next twelve years. Source: Daniel…Read More

Category: Fixed Income/Interest Rates, Inflation

Category: Credit, Fixed Income/Interest Rates, Think Tank

Hey, Janet (with apologies to the Beatles)

With August upon us and many readers likely at the beach, here is some levity from one side of the vocal debate on the future of Fed policy. Please hum the melody of Hey Jude as you read the lyrics. With thanks and credit to the Beatles.   “Hey Janet” Hey Janet, don’t make it…Read More

Category: Federal Reserve, Fixed Income/Interest Rates, Humor, Music

Source: Societe General, BlackRock

Category: Fixed Income/Interest Rates, Markets

QE Auctions of Treasury Bonds

Category: Bailouts, Federal Reserve, Fixed Income/Interest Rates, Think Tank

Rising Rates Unliklely to Kill This Bull Market

One of the oldest rules on Wall Street is, don’t fight the Fed. When the Federal Reserve is cutting rates, you want to be long equities, and when it is tightening, get out of the way. This has been a cause for concern since the Fed began talking of tapering its program of quantitative easing…Read More

Category: Federal Reserve, Fixed Income/Interest Rates, Investing, Markets