4 ms·

It's called "Talking your book". :-) The idea of borrowing cheap in one place and investing for higher yield isn't new. Banks and investors borrowed German b

It's called "Talking your book". :-) The idea of borrowing cheap in one place and investing for higher yield isn't new. Banks and investors borrowed German bonds to invest in Greek bonds, and investors borrowed in Japan to invest in Iceland. It works for a while until it doesn't. When you're levered the end goes from bad to worse, and usually has cyclical implications. (Forced sales to make margin calls depresses the stocks even more as people rush the exits)

roymurdock 11y ago
Yes, I guess this was written to appeal to everyone who agrees that the finance/econ system is screwed. Gross is saying "I get it, I agree, no one understands this better than me," which differentiates him from a lot of other managers who like to reiterate that things are fine, don't take your money out of our funds, thank you. An interesting but self-defeating ploy. If the system is set up to shrink/collapse, I'm not going to put my money into said system, even if you vaguely promise me 5-6% returns until collapse. Not that my opinion matters as my net worth is marginal, and this outlook will probably get some of the doom and gloom crowd to sign up with his fund. Funny how much of finance is marketing...how much of everything is marketing...
fensterblick 11y ago
"Talking your book" == putting money where your mouth is. Bill Gross, especially when he was at PIMCO running the world's largest bond fund, had to invest in what he believed in. They couldn't market themselves out of a losing position.
- mathattack 11y ago
  I respectfully think you have it backwards. Generally financiers put their mouth where their money is, not the other way around. (They talk up where they are investing, not choosing to back their ideas up with investments) They're in the investment business, not the talking business. This isn't a comment on their ethics, just their incentives. Talking their book helps them in winning positions too - it can provide greater liquidity. If it was positive NPV for them to keep quiet, every investor would.
  - drumdance 11y ago
    Maybe if you're Bill Gross this is true, but the vast majority of fund managers never get on TV to talk their book in the first place. Just like (good) VCs have an investment thesis, most fund managers do too.
    - mathattack 11y ago
      Going public can be a risky strategy. You only want to do it when you benefit from the exposure. You do it after you're already in the position and won't want to get more. (For instance, "I am long High Yield credit") If you're still accumulating something harder to access ("I'm buying Inverse Mortgages") then you don't want to be public. You also hold yourself up to be second-guessed. It's a tradeoff. CNBC and Bloomberg TV are full of talking heads all day long, though they only scratch the surface on potential fund managers.

roymurdock 11y ago

Yes, I guess this was written to appeal to everyone who agrees that the finance/econ system is screwed. Gross is saying "I get it, I agree, no one understands this better than me," which differentiates him from a lot of other managers who like to reiterate that things are fine, don't take your money out of our funds, thank you. An interesting but self-defeating ploy. If the system is set up to shrink/collapse, I'm not going to put my money into said system, even if you vaguely promise me 5-6% returns until collapse. Not that my opinion matters as my net worth is marginal, and this outlook will probably get some of the doom and gloom crowd to sign up with his fund. Funny how much of finance is marketing...how much of everything is marketing...

fensterblick 11y ago

"Talking your book" == putting money where your mouth is. Bill Gross, especially when he was at PIMCO running the world's largest bond fund, had to invest in what he believed in. They couldn't market themselves out of a losing position.

mathattack 11y ago
I respectfully think you have it backwards. Generally financiers put their mouth where their money is, not the other way around. (They talk up where they are investing, not choosing to back their ideas up with investments) They're in the investment business, not the talking business. This isn't a comment on their ethics, just their incentives. Talking their book helps them in winning positions too - it can provide greater liquidity. If it was positive NPV for them to keep quiet, every investor would.
- drumdance 11y ago
  Maybe if you're Bill Gross this is true, but the vast majority of fund managers never get on TV to talk their book in the first place. Just like (good) VCs have an investment thesis, most fund managers do too.
  - mathattack 11y ago
    Going public can be a risky strategy. You only want to do it when you benefit from the exposure. You do it after you're already in the position and won't want to get more. (For instance, "I am long High Yield credit") If you're still accumulating something harder to access ("I'm buying Inverse Mortgages") then you don't want to be public. You also hold yourself up to be second-guessed. It's a tradeoff. CNBC and Bloomberg TV are full of talking heads all day long, though they only scratch the surface on potential fund managers.