So-called bond king Gross has been ‘wrong and wrong badly,’ his boss at Janus says

Discussion in 'Financial Futures' started by bone, Aug 10, 2018.

  1. bone

    bone ET Sponsor

    I cannot believe Gross spread the Bund versus the US Ten Year. What a shit show.

    https://www.marketwatch.com/story/s...wrong-badly-his-boss-at-janus-says-2018-08-09

    Is Bill Gross still the bond king? Maybe not. The quondam fixed-income royalty—at least by the recent reckoning of his current employer—got less than a ringing endorsement from his own boss, Janus Henderson CEO, Richard Weil, on Thursday.

    ‘And so he hasn’t lost faith in his fundamental view. But he’s been wrong and wrong badly in the short term. And he’s accountable and we’re accountable for that’
    —Richard Weil, CEO at Janus Henderson CEO

    The less-than-flattering statements about the 74-year market maven, made by Weil during an early morning interview on CNBC, comes as investors have pulled money out of Gross’s Janus Henderson Global Unconstrained Bond JUCAX, +0.00% for a fifth straight month, according to a Bloomberg News report. The report indicates that Gross’s signature fund has seen $200 million in redemptions just last month, rapidly shrinking the assets that he manages to $1.25 billion from $2.24 billion.

    Oddly enough, to folks who have followed Gross, those losses emanate from bets he made on U.S. Treasurys TMUBMUSD10Y, -2.23% and German government bonds, known as bunds TMBMKDE-10Y, -15.04% expecting that the gap between the pair of sovereign debt rates would converge. They haven’t.

    The interesting aspect of those investment plays is that it hews with previous wagers that have failed to come good for Gross. In 2015, Gross declared bunds, the “short of a lifetime.” He told CNBC that same year that “It’s just a question of when,” referring to that bund bet materializing.

    Gross: German 10yr Bunds = The short of a lifetime. Better than the pound in 1993. Only question is Timing / ECB QE

    — Janus Henderson U.S. (@JHIAdvisorsUS) April 21, 2015
    Indeed, it is the “when” that has thus far confounded Gross, one of the more-respected investors on Wall Street and a frequent guest on Bloomberg, CNBC and other news outlets, proffering market pearls.

    Gross has been featured prominently in MarketWatch as well. About three years ago, he predicted the end of the rip-roaring bull market. However, the current stock bull market is entering its 10th year and approaching a record not seen since 2000, with the Dow Jones Industrial Average DJIA, -1.07% although lagging behind its peers, up 3.5% so far in 2018, according to FactSet data as of Wednesday’s close. The S&P 500 index SPX, -0.77% is within 1% of eclipsing its Jan. 26 record, while the Nasdaq Composite COMP, -0.87% stands just 50 points shy of its all-time high.

    That is not to say that Gross is entirely wrong—far from it. He makes the case that ultraloose monetary policies, which have artificially inflated asset values, have fostered an environment ripe for a downturn. That is certainly top of mind for investors as lofty stock values persist and the convergence of the so-called yield spread between short-term and long-term U.S. government debt, known as the yield curve, flashes yellow recession warnings.

    But as famed economist John Maynard Keynes has said, “the market can remain irrational longer than you can remain solvent.”

    Gross’s issues go well beyond Wall Street. The former Pimco luminary, who left that firm in high dudgeon back in 2014, is battling through an ugly divorce, a factor that is certain to make remaining the bond king very challenging, indeed.

    A call to Janus wasn’t immediately returned.
     
  2. Blehs

    Blehs

    How come you can't believe it?
     
  3. bone

    bone ET Sponsor

    Because the risk profile for that particular spread is so much greater than the types of trades that made Bill Gross famous - and CERTAINLY more risky than what an investor in a fixed income mutual fund like Janus Funds should expect.

    IMO that spread is a Hedge Fund risk profile type position. Hell, I wouldn’t even trade that spread.
     
  4. drcha

    drcha

    Maybe he is just early. After such a long bull market in bonds, it seems likely we'll get the govt bond short of a lifetime across the developed world in the not too distant future.
     
  5. themickey

    themickey

  6. bone

    bone ET Sponsor

    Just to clarify - Gross made a spread bet on the differential convergence between US sovereign debt and German sovereign debt. And those two spaces have been highly uncorrelated for quite some time now.
     
  7. Pekelo

    Pekelo

    I didn't read the whole shebang, but what if he took those positions unrelated? For different reasons and not because he thought they are going to converge?