Tag Archives: Pimco

PIMCO hires Kashkari

Just yesterday, I linked to a story from the Washington Post on the man who handled the $700bn TARP by the US government.  In it, the man ponders about the possibility of going back to work after about 6 months of living free from all the troubles of Washington.  True enough, a day after, we’re finding out that Neel Kashkari has been hired by fixed income giant PIMCO to be a managing director and head of new investment initiatives.

See the story via WSJ.

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PIMCO bearish on the greenback

Via a Bloomberg report, a portfolio manager from PIMCO today made the remark that the dollar could lose value after the central bank has pumped a huge amount of money into the system.  Curtis Mewbourne said the dollar’s drop could be strongest against emerging market currencies.  This adds to the pressure which began when the Chinese government and Russian president Dimitry Medvedev suggested the use of a new global currency.

From the report:

“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.

“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote.

Read more.

“Investors shoulconsider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.
“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote.

I believe that if the dollar were to lose value, it shouldn’t be by a lot.  It should only be in time that the Fed would begin pulling out the huge amount of money in the system, aka implement the exit strategy.  Because along with the prevention of inflation, keeping the value of the dollar is/should be another priority and when the exit strategies are already in place, its effects should be felt in both reduced inflation and steady value for the greenback.

PIMCO to enter active ETFs market

The biggest bond fund manager is planning to take advantage of its expertise in the bond market as well as the growing ETF segment.  A Bloomberg report says PIMCO is planning on coming up with five ETFs, three of which will be invested in short-term bonds maturing in less than a year while the other two will be in munis.

Quoted by Bloomberg on its report,

“ETFs are increasingly an important investor tool,” Don Suskind, Pimco’s head of ETF product development, said in an interview. “By offering active ETFs, we believe there will be a broader set of investors that can access Pimco’s investment expertise.”

Read the rest HERE.

A pretty smart and strategic move, I must say.  They can easily have a monopoly of bond-related ETFs in the market, at the moment when most of the existing funds are invested in equities.

CIT escapes bankruptcy

Sunday night, the big small-business lender CIT Group managed to snatch a $3bn deal with its creditors that buys it time, allowing it to escape bankruptcy… for now.  There will be at least six creditors providing the capital to the lender, including Baupost, a Boston-based hedge fund, CapRe, hedge fund and private equity firm Centerbridge Partners, and Pimco.

The deal will be providing CIT nothing but a short-term financing and a period of time that may or may not be enough for it to resolve some of its liquidity problems.  Without significant changes in its capital structure, the firm might just find itself in the brink of filing for Chapter 11 yet again.  Getting additional capital from bondholders not only will allow it to improve itself, but also reduce losses for the creditors and prevent the decimation of the American public’s investment via the TARP.

Here’s an excerpt from a WSJ report:

Under the proposal, CIT would likely pay interest rates 10 percentage points above the London interbank offered rate, said these people. (As of Friday, three-month Libor stood around 0.5%.) CIT has also agreed to pledge some of its highest-quality loans as collateral on the $3 billion package.

The new loan could act like a “bridge” to a series of debt-exchange offers that CIT would launch in order to get bondholders to swap some of their bonds for equity in the company or for new debt that matures later.

More from WSJ HERE. Or via FT HERE.

The news helped the stock surge more than 50% in the Frankfurt market, while also shaping the Dow futures to what may be yet another positive trading session on this new week.

BlackRock, Invesco, Wellington to take part in PPIP

BlackRock Inc., Invesco Ltd. and Wellington Management, Co. have been named by an undisclosed source to be three of the eight to ten asset managers who will be part of the government’s  PPIP, aiming to rid some of the biggest banks the toxic assets that have paralyzed the system leading to this financial crisis.

From Bloomberg:

PPIP will start with about $20 billion, half raised by the money managers and half from the Treasury, people familiar with the plan said last week. The firms will have access to $10 billion in financing backed by the government. That will enable money managers to offer enough to persuade banks to sell their troubled assets, said Wilbur Ross, chairman and chief executive officer of WL Ross & Co., the New York-based Invesco subsidiary that will lead that company’s PPIP efforts.

Read the entire news HERE.

NYT on Bill Gross

David Leonard of the New York Times wrote a feature on Bill Gross, a manager at PIMCO, the world’s biggest bond fund. It was a lengthy but a bit of a good read.

Mr. Gross has been through crises before. He nearly died — and briefly lost part of his scalp — in 1966 when he crashed his car while making a doughnut run for his fraternity brothers at Duke University. He spent much of his senior year recovering in the hospital. He also became obsessed with blackjack after reading “Beat the Dealer: A Winning Strategy for the Game of Twenty-One,” by Edward O. Thorp, an M.I.T. mathematics professor (who is now a very successful hedge fund manager).

After he got his diploma, Mr. Gross hopped a freight train to Las Vegas with $200 sewed into his pant leg. He played blackjack for 16 hours a day. “After a while it gets pretty boring and pretty stinky,” he recalls. “People lose money. They don’t win it. You’re just watching the dealers.”

After getting the degree, he called all the big Wall Street brokerage firms. Nobody called him back.

FINALLY, his mother showed him a classified ad for a junior credit analyst in the bond department at the Pacific Investment Management Company, a subsidiary of Pacific Mutual Life.

Read the whole thing HERE.

Gross: US would lose its AAA

A day after the UK was downgraded by rating agency Standard & Poor’s to negative, the US also saw its shares tumbling down and Treasury yields going up after PIMCO’s Bill Gross said in an interview with Bloomberg that the markets are now being troubled by the possibility of the US eventually losing its AAA rating.

While it will not happen overnight, Gross said it is only a matter of time before this happens.  Geithner was quick to respond by calling on the Obama administration to enact policies that aims to cut the budget deficit to 3% of GDP from the projected 12.5% this year.

From Bloomberg:

“It’s very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term,” Geithner said in an interview with Bloomberg Television. He added that the target is reducing the gap to 3 percent of gross domestic product or smaller, from a projected 12.9 percent this year.

He added:

“The important thing to recognize is that growth will stabilize and start to increase first before unemployment peaks and starts to come down,” he said. “These early signs of stability are very important” although “this is still a very challenging period for businesses and families across the United States.”

How cutting the deficit by that much could happen and when is still yet to be seen.