Bill Gross Sends Out Big Apology To Investors, And Then Declares That The Economy Is Doomed

Image: Bloomberg Television

Funny, just yesterday afternoon we pointed out the irony of nobody caring about the fact that Bill Gross had loaded up the boat on the long end of the yield curve, a gamble that obviously meant one thing: He sees no growth or inflation ahead -- essentially an economy that's doomed.

Well....

Now he might get more attention, because he just put that in writing.

Dealbreaker (via ZeroHedge) put up a special letter from Gross to his investors titled, simply Mea Culpa.

For those not caught up on Gross' year, he's ranked 536 out of 584 bond funds this year, mostly due to the fact he predicted (quite loudly in the press) that the end of QE2 this summer would see yields soar. But they didn't. Instead, the economy started slowing down right then, and the flight to Treasuries was ON, creaming his bet.

Here's his mea culpa summed up in one sentence from the letter:

The simple fact is that the portfolio at midyear was positioned for what we call a “New Normal” developed world economy – 2% real growth and 2% in?ation. When growth estimates quickly changed it was obvious that I had misjudged the ?y ball: E-CF or for non- baseball a?cionados – error center?eld.

But now, after he's made his monstrous bet on the long end he no longer believes in the new normal.

So where do we go from here? Our internal growth forecast for developed economies is now 0% over the coming several quarters and the portfolio more accurately re?ects this posture. Yet even so, can the golden glove regain its magic? Well, as I’ve indicated, we’re showing up early every day at the ballpark – in this case for a little ?elding practice. And perhaps importantly, we recognize the majesty of the stadium we’re playing in. This is big league ball, where your ticketholders come to the park expecting not a circus Willie Mays catch but more wins than losses and a yearend performance that places your bond assets near the top of the standings.

He's really inviting a "swing for the fences analogy"

Baseball metaphors aside, we know why PIMCO Total Return is arguably the largest and hopefully the greatest bond fund in the world. You want consistency, no surprises, but at the same time you want to get back through outperformance more than you pay for in fees. PIMCO, Mohamed El-Erian, and yours truly are working hard to make that happen. Despite the approaching World Series, for us it’s
the beginning of a new season. Play ball!

Of course, the depressing thing for Gross here is that his new bet on lower rates and horrible growth is already looking out of step (maybe).

He went long sometime before the end of September, and no doubt you've seen the jump in long rates since then, from under 2.8% on the 30-year Treasury (below) to over 3.2%. A similar move is seen in the 10-year.

Of course everything could go off the rails on the turn of a dime, and Gross's bet on lower rates will look fine, but you can just sense from the letter that it's all on the line at the fund, and with fundraising shriveling up of late, it's not hard to understand the pressure.

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

The 4 Reasons Investors Are Feeling Giddy Today

  x You have successfully emailed the post. The Dow is up 275 points and the bulls having a field day.

Four big news items from China, Europe, and the U.S. could be making markets surge today.

With new economic data and announcements looking positive on all sides, the cynicism of late Q3 is gone, and Q4 optimism dominates.

Any guesses on how long that will last?

Please follow Money Game on Twitter and Facebook.
Follow Simone Foxman on Twitter.
Ask Simone A Question >

x

To embed this post, copy the code below and paste into your website or blog.

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

SEC Sues Deaf Investment Adviser For Allegedly Defrauding More Than 7,000 Deaf Investors

  x You have successfully emailed the post.

SEC headquarters" />The SEC is suing Jody Dunn, a deaf 43-year-old Texas man who is currently unemployed and receives social security disability insurance, for allegedly duping more than 7,000 deaf investors out of $3.45 million before regulators stopped him last year.

In the complaint, the SEC claims Dunn told people he would invest their money with Imperia Invest IBC, an Internet-based firm that claimed to guarantee returns of 1.2% a day. 

"Approximately 7,133 deaf investors sent money to Dunn, who represented that he would invest in Imperia on their behalf," the commission said in its complaint (Download PDF).

Instead, the SEC says Dunn took $353,068 --more than 10% of the investors' funds-- to pay his mortgage, make car payments, pay for car insurance and a variety of other personal expenses.  The rest he sent to Imperia's offshore bank accounts.

In October of 2010, the SEC issued a court order to freeze Imperia's assets and charged the firm with fraud.

Here's a video that appears to be from an angry investor called "Imperia Invest die!!!!!"

Please follow Clusterstock on Twitter and Facebook.
Follow Julia La Roche on Twitter.

x

To embed this post, copy the code below and paste into your website or blog.

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

FORGET FUNDAMENTALS: Here's What Investors Really Care About Right Now

  x You have successfully emailed the post. From BTIG's Dan Greenhaus, an insightful look at the anxietites of investors:

In recent meetings with clients, we have debated several topics including the apparently depressed forward PE ratio for the S&P 500 (we take issue with the word “depressed”) as well as relative value models that compare equity v. bonds through dividend and nominal bond yields. Unfortunately though, one topic continues to dominate our meetings much to the chagrin of clients; the importance of policy makers in the current environment. At the end of most meetings, we point out to clients that while we would like to spend most of the time debating the academic issues outlined above, the fact remains that our meetings are dominated by discussion of Angela Merkel, Zhou Xiaochuan, Barack Obama and George Papandreou.

That was obviously in play today:

On the one hand and in a secular sense, environments in which policy makers dominate headlines are not environments in which investors feel comfortable bidding up stocks. Simply put, PE ratios do not expand in this type of environment leaving organic earnings growth to drive price appreciation (more on 2012 earnings expectations another time). Secondarily, and today’s action is a perfect illustration, policy makers ultimately and unfortunately drive price action and while this helped at the end of the day -- news that China was interested in Italian bonds or Italy was interested in China buying its debt drove a significant end of day rally -- the fact remains that investing is made all that more difficult when returns come at the whim of those without a profit motive.

Please follow Money Game on Twitter and Facebook.
Follow Joe Weisenthal on Twitter.
Ask Joe A Question >

x

To embed this post, copy the code below and paste into your website or blog.

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.