Cash--Not Just Bill Gross--Leaves PIMCO

Friday the 29th of September will probably go down a major historical moment in the modern financial services world's history. Bill Gross resigned from PIMCO, the firm he founded in 1971 and grew into the largest bond portfolio manager in the world.  Gross not only resigned, but he moved to Janus Capital and will run a global-macro fixed income fund there.

It's probably a long story, but my take is that Gross was at odds with the people running PIMCO (which a while back was bought by Allianz, a giant insurance company based in Germany) on how to run the company.  Gross just wants to manage money.  Evidently.  He is a billionaire and 70 years-old...  not exactly in need of a new job.

Here's an article from the Wall Street Journal about cash flowing out of PIMCO's Total Return fund, which Gross has led since inception.  It's the largest mutual fund in the world.  If all investors cashed-out and the fund liquidated all holdings, bond prices would surely be affected adversely around the globe--supply and demand is a real thing, and flooding the marketplace with $200 billion in bonds would have impact.

Perhaps the main take on this for my clients is that it's an example of how I can help.  1/3 of PIMCO Total Return fund's assets are from individual investors' 401(k) plan holdings.  How many of us know what's in our 401(k)?  A lot of us, but not enough.  And even among those who know, how many were clued-in to the Gross resignation and know how to respond?  Well, that's where I believe I am extra helpful...

Bill Gross Leaves PIMCO, Starts At Janus Capital Group on 9/29/14

Bill Gross, the founder and co-head of PIMCO (perhaps the world's largest manager of bond mutual funds) has left the firm and joined Janus Capital Group.  He starts next week.

My job here is to figure out if we should continue using our PIMCO mutual funds.  I think the answer is going to be Yes, but I'm working to make sure I am still comfortable with each fund we are using.

I won't offer too much speculation here, but what I do know is that Gross founded PIMCO and built it into a huge, and hugely successful and greatly respected firm, that PIMCO is owned by Allianz (a German insurance/financial giant), and that Gross' former co-leader at PIMCO left PIMCO last year but retained a high-level position at Allianz.  Gross maybe had to jump ship from his own company, or maybe he got pushed out.  The man is a true billionnaire and so this probably is not about his compensation.  Anyway, that's where I start to get into spectulation…

PIMCO has a lot of great talent, several of the PIMCO mutual funds I use for my clients were not actually managed by Bill Gross, and we can get out of any PIMCO product we want at any time.

So, please contact me with questions, and I'll be back in touch about whether I want us to stick with our PIMCO funds.

Thank you, and happy Friday!

--Gary

Gary Partoyan

Potomac Wealth Strategies, LLC

(703) 746-8195 direct

Visit us online for helpful ideas and information!

Flex Portfolio Funds: Recent Commentaries

Here are links to commentaries offered by several mutual funds used in the Flex Portfolios.

PIMCO Total Return Fund

PIMCO All Asset Fund

PIMCO Income Fund

Yacktman Focused Fund

First Eagle Overseas Fund

Ivy Asset Strategy Fund

Permanent Portfolio Fund

Arrow DWA Tactical Fund

First Eagle Global Fund

Templeton Global Bond Fund

Please contact me with any questions about these mutual funds.  Thank you.

--Gary Partoyan

Bill Gross' Lets It All Hang Out--Radical Change of Approach Needed for USA

If you can get over the initial intellectual/emotional hurdle presented by this article--that college is, for many if not most, as it is currently working, not exactly part of the solution to our economic woes--you'll find a lot to chew on here.

Bill Gross is arguably the greatest money manager in modern history (he's "the bond king" and "the Warren Buffett of bonds"--and his PIMCO Total Return fund is the largest mutual fund on the planet and owns a tremendous market-beating track-record), and he has a global perspective that is almost uniquely astute and often pretty unconventional.  And he calls it like he sees it, whatever "it" is...

In short, he sees no way for private-sector market-based idealism--OR government-as-usual--to dig us out of this hole any time soon.  Time to think radically, perhaps.

We have created less than two-million jobs while the workforce has expanded by 15 million people in the past decade.  And while he doesn't say it here, there's a strong argument to be made that the 20mm+ jobs created in the previous decade were largely thanks to a largely false (over-leveraged, service-based instead of asset/manufacturing-based) economy...  think of the causes of the economic disaster that started in late-2007 and persists today.

Balancing the budget and re-jiggering the cost-curve of entitlements and healthcare programs are of course necessary, Gross says or implies, but will not be enough to close this employment gap, and neither will the education provided by Today's version of undergraduate college education.

Call to action, or crazy billionaire screaming?  Either way, I'm listening.

Bill Gross' Big Idea

Bill Gross, the "Warren Buffett of Bonds", is in the news this week. He has a radical idea to help "Main Street" and boost the economy.

In short, the tremendously successful billionaire, who runs what is the largest and, arguably, the best mutual fund in the country, wants Fannie Mae and Freddie Mac to lower the interest rates on all mortgages they hold now. Significantly. Like 6% loans would go down to 4%.

This would massively reduce the monthly payment obligations of the borrowers while still requiring they pay-back all of what they borrowed.

This would not require lenders to write-down the value of assets, either. They'd have to suck it up and plan on 1/3 less income, though.

Let me know what you think.