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Masters in Business: Janus Capital Group Bill Gross (Audio 2) · Masters in Business

0:03
Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio. Hi,
0:08
Speaker 1: this is Barry Ridholts. You're listening to Masters in Business
0:10
Speaker 1: on Bloomberg Radio, Bloomberg dot Com, Apple iTunes and everywhere else.
0:16
Speaker 1: This is the second half of our interview with Bill
0:19
Speaker 1: gross By. Now you should have listened to part one,
0:23
Speaker 1: in which he described going into the folks of Pacific
0:27
Speaker 1: Life quote unquote knees knocking and proposing they set up
0:31
Speaker 1: a standalone bond shop. Uh, the early days at PIMCO,
0:35
Speaker 1: who his mentors were. That's a fascinating conversation. If you
0:38
Speaker 1: haven't heard it, I suggest you find that and listen
0:41
Speaker 1: to that first. This half is really the latter days,
0:46
Speaker 1: and he describes um how PIMCO grew to be the
0:51
Speaker 1: monster it effectively became. He describes his creation of portable Alpha.
0:57
Speaker 1: I don't know if you knew that that's essentially a
0:59
Speaker 1: Bill gross invention. He describes why and how stability leads
1:04
Speaker 1: to instability, and we get to talk about our mutual
1:08
Speaker 1: friend Paul McCulley, who brought Himan Minsky to his attention.
1:12
Speaker 1: Who Minsky essentially as a person who explains why stability
1:18
Speaker 1: leads to instability. People become complacent, they become more more aggressive,
1:23
Speaker 1: they take more risks, and eventually that that has a
1:26
Speaker 1: bad ending. And he talks about the FED and QUEI
1:29
Speaker 1: and what it was like in the midst of the crisis,
1:33
Speaker 1: what it was like to when the FED said They're
1:36
Speaker 1: gonna go and buy mortgage backed securities. How come nobody
1:39
Speaker 1: else did. People didn't trust the FED, they didn't believe it.
1:42
Speaker 1: He made a bet that the FED was telling the truth,
1:45
Speaker 1: and it netted him ten billion dollars in returns for
1:48
Speaker 1: the total return fun shareholders. So he also says some
1:54
Speaker 1: very very interesting things about his exit from PIMCO. He
1:58
Speaker 1: still is is small learning from that. He feels blindsided.
2:02
Speaker 1: He was stunned. He didn't know that a founder slash
2:04
Speaker 1: c I O slash shareholder can be unceremoniously dumped. He
2:10
Speaker 1: says he was fired from PIMCO, and he thinks PIMCO
2:12
Speaker 1: made a mistake. They should have let him. They should
2:15
Speaker 1: have accepted his offer, in Bill's words, to step down
2:18
Speaker 1: from total return, just from run the closed end funds
2:21
Speaker 1: and and sort of sail off into the sunset ala
2:25
Speaker 1: Peter Lynch. But that didn't happen, and I think, um,
2:29
Speaker 1: he feels he still has something to prove, and that's
2:31
Speaker 1: how he ended up at at Janice Capital. So anyway,
2:35
Speaker 1: this is the second half. Um, it's another hour, and
2:37
Speaker 1: again you'll find Gross to be very forthcoming, very intelligent,
2:42
Speaker 1: and very articulate. I found it to be a fascinating conversation,
2:46
Speaker 1: and I think you will also with no further ado.
2:49
Speaker 1: Here is Bill Gross. This is Masters in Business with
2:55
Speaker 1: Barry Ridholts on Bloomberg Radio. What is the state of
3:01
Speaker 1: the US economy and what do you think about what's
3:05
Speaker 1: happening in Europe and Japan? Well, the entire world, let's
3:09
Speaker 1: let's start there is suffering from a lack of aggregant
3:12
Speaker 1: demand and that that's almost so undefinable. I suppose it
3:19
Speaker 1: takes a textbook, has to be relatively useless, but it
3:24
Speaker 1: basically means that the the world is suffering from high
3:27
Speaker 1: debt levels, which um which in the past have promoted
3:32
Speaker 1: lots of demand over the past thirty years and can
3:34
Speaker 1: do so no longer. That the world is in the
3:38
Speaker 1: slow process of a demographic crawl towards older age, and
3:42
Speaker 1: we see that with Japan and Germany and certainly with
3:45
Speaker 1: the boomers in the United States, although our economy is
3:48
Speaker 1: less affected. UM. We see that with technology as robots
3:52
Speaker 1: replaced people uh you know, jobs from Apple and Google.
3:56
Speaker 1: God bless them. They're great companies, but they don't create
3:58
Speaker 1: a lot of jobs. They create gadgets and wonderful uh
4:02
Speaker 1: you know things to uh to to communicate with. UM.
4:06
Speaker 1: So the world has changed from the standpoint of aggregate demand.
4:09
Speaker 1: There's less of it because of debt, demographics, and technology,
4:13
Speaker 1: other influences and so, UM, you know, we are fighting
4:18
Speaker 1: what Summers called structural headwinds. We're fighting what I call
4:22
Speaker 1: the new normal. Uh. The world uh you know, in
4:27
Speaker 1: the developed world cannot grow the way it used to grow.
4:29
Speaker 1: It's probably a one to growth rate. UM. You know,
4:33
Speaker 1: shouldn't if Europe ever, you know, get out of the whole. Uh.
4:37
Speaker 1: In emerging market countries that they've got their own problems
4:41
Speaker 1: commodity based, commodity related and dependent upon UH capital inflows
4:47
Speaker 1: which now are being pulled back, and so their growth
4:50
Speaker 1: rates while underdeveloped and having less debt on their balance sheet.
4:56
Speaker 1: And developed countries have problems of their own that from
5:00
Speaker 1: a financial standpoint, limit their ability to grow. So that
5:03
Speaker 1: the the globe, Yes, still grows. The I m F
5:08
Speaker 1: puts out forecast of three plus and a lot of
5:11
Speaker 1: that's China. But um, so it still grows, but it
5:14
Speaker 1: glows much more slowly. And and so from the standpoint
5:17
Speaker 1: of the US, what we're seeing now at at three
5:21
Speaker 1: plus is a little bit of a mirage. You know.
5:25
Speaker 1: I I believe in the one to two percent structural
5:28
Speaker 1: growth rate that we will you know, very quickly move
5:32
Speaker 1: back down towards. And that's not all that bad relative
5:36
Speaker 1: to everybody else, but it's not what we're used to.
5:39
Speaker 1: And in terms of corporate profits and and growth and
5:44
Speaker 1: and PE ratios, etcetera, etcetera. It's really a suggestion that
5:49
Speaker 1: the as I mentioned in my investment outlook last month,
5:52
Speaker 1: the the good times are over and returns this year
5:57
Speaker 1: in my opinion may h and any cases have minus
6:01
Speaker 1: signs in front of them as opposed to positive signs.
6:03
Speaker 1: So you don't think that five percent print in GDP
6:06
Speaker 1: is sustainable? Oh god no, um, But but that's what
6:10
Speaker 1: they want. That that's what the Fed. The FED wants
6:13
Speaker 1: five percent nominal GDP. That's their target because if the
6:15
Speaker 1: economy can grow at five percent, it can continue to
6:19
Speaker 1: to pay off you know, it's it's interest rate bills,
6:22
Speaker 1: both publicly and privately. UM. If it only grows at
6:26
Speaker 1: three percent or three percent two percent, then uh, an
6:31
Speaker 1: economy like the United States, a levered economy like the
6:34
Speaker 1: United States, has a difficulty in terms of pain you know,
6:37
Speaker 1: for its past consumption. It's past credit. UM. It's just
6:41
Speaker 1: that simple and um. You know we shall see. You know,
6:47
Speaker 1: since since Lehman Brothers credit private credit credit I mentioned
6:52
Speaker 1: in the first segment, that had grown from one trillion
6:54
Speaker 1: to fifty eight trillion has grown about a three to
6:57
Speaker 1: four percent clips. Some in some sectors higher like with
7:01
Speaker 1: the government and their deficits, some cases lower like with
7:05
Speaker 1: mortgages and in private consumers. But in any case, that's
7:09
Speaker 1: been growing at three to four percent UM. The the
7:13
Speaker 1: economy needs credit to grow three for four percent needs
7:16
Speaker 1: nominal GDP or else um uh assets um in order
7:23
Speaker 1: to make the cover to make the interest rate UM,
7:26
Speaker 1: they start to be sold, and that that's the beginning
7:29
Speaker 1: of a debt deflation that all central banks want to prevent.
7:33
Speaker 1: I want to avoid deflation. Let you mentioned you mentioned
7:36
Speaker 1: aggregate demands. Leads me to a conversation I add with
7:42
Speaker 1: your colleague Paul McCulley, who was defending what the Federal
7:47
Speaker 1: Reserve had done on the basis that Congress had abdicated
7:52
Speaker 1: their responsibility. We normally see following a financial crisis, big stimulus,
8:00
Speaker 1: a lasting stimulus, and a lot of hiring on the
8:03
Speaker 1: state and federal level. We didn't get this time. If anything,
8:07
Speaker 1: we saw a contraction on the state and local level.
8:10
Speaker 1: And while we had a i want to call it
8:14
Speaker 1: a eight hundred billion dollars stimulus, half of it were
8:17
Speaker 1: temporary tax cuts and on a big chunk of it
8:20
Speaker 1: was temporary extension of unemployment. So you were really left
8:24
Speaker 1: with like a two or a three hundred billion dollar stimulus,
8:27
Speaker 1: and he was talking about a two to three trillion
8:29
Speaker 1: dollar stimulus. Let's talk a little bit about Congress this cycle.
8:35
Speaker 1: Did they do what they should have done following the crisis?
8:38
Speaker 1: And did I'm paraphrasing Paul, did the Fed really have
8:43
Speaker 1: no option? Was it, Hey, we're the only game in town.
8:46
Speaker 1: If we don't do something, we're just gonna spiral to
8:49
Speaker 1: really bad places. I'm with Paul there with the exception
8:53
Speaker 1: that they shouldn't have gone blow one percent, and that's
8:56
Speaker 1: the problem now. And I'm with Krugman and Summers and
9:00
Speaker 1: uh and McCauley in in terms of the need for
9:03
Speaker 1: fiscal stimulation and the lack of it as you just
9:08
Speaker 1: described it, there's there's no doubt that at these interest rates, uh,
9:13
Speaker 1: you know, the government could be financing a multitude of
9:16
Speaker 1: infrastructure uh projects. And then we have the Republican view
9:21
Speaker 1: and the democratic view in terms of the uh, the
9:24
Speaker 1: productivity of public investment. But you know, let's face it,
9:29
Speaker 1: there's lots of areas in terms of roads and um
9:33
Speaker 1: other large projects that the government must do and and
9:36
Speaker 1: has done rather efficiently in the past. And so let's
9:39
Speaker 1: let's borrow money cheaply at two on a tenure basis
9:43
Speaker 1: and use that money to uh, you know, to to
9:46
Speaker 1: create jobs and to to repair obvious deficiencies and uh,
9:52
Speaker 1: you know, our private infrastructure and public infrastructure. So yeah,
9:56
Speaker 1: I think we've fallen down from a fiscal standpoint. Did
10:00
Speaker 1: the monetary authorities have no other choice? Um? Probably not,
10:05
Speaker 1: But with the the exception of of going going to zero,
10:10
Speaker 1: I think they could have stopped center at one. You know,
10:13
Speaker 1: certain countries have looked at and issued fifty year bonds
10:18
Speaker 1: to finance their long term debt. Is that something that
10:21
Speaker 1: makes sense for the United States now that rates are
10:24
Speaker 1: this low? Yeah, I think someone we're looking at it.
10:26
Speaker 1: I mean, they put out feelers and uh uh, you know,
10:29
Speaker 1: they bring in private companies like like Pimco, not Channis
10:35
Speaker 1: at the moment, but and asked them as to the
10:39
Speaker 1: you know, to the viability of a fifty year bond
10:42
Speaker 1: and who would be a buyer, and doesn't make sense?
10:44
Speaker 1: And yeah, certainly from the standpoint of pension funds which
10:48
Speaker 1: are terribly um in many cases still underfunded and mismatched.
10:54
Speaker 1: Uh yeah, fifty years maybe a little long, but you know,
10:58
Speaker 1: their problems emanated from the fact that there liabilities were
11:04
Speaker 1: always much longer than their assets and um, and now
11:09
Speaker 1: they're in many cases they're terribly underfunded. So sure, a
11:12
Speaker 1: fifty year piece of paper would make sense from the buyer.
11:15
Speaker 1: It would probably come at a Yeah, let me take
11:20
Speaker 1: that back. I'm not sure whether they would come at
11:22
Speaker 1: a premium to a to a thirty year piece of
11:25
Speaker 1: paper because of the convexity inherent in it. But in
11:29
Speaker 1: any case, it would be cheap and half something like that.
11:33
Speaker 1: Probably less, you know, probably less, Yeah, probably closer to
11:36
Speaker 1: this is my money for half a century giving two
11:38
Speaker 1: point seven five? Is that right? Right? Um? Or three percent?
11:42
Speaker 1: And so it would be very cheap financing for a
11:44
Speaker 1: government and could be put to productive us. So I
11:49
Speaker 1: want to get to a lot of the questions that
11:51
Speaker 1: people had asked on Twitter. But let's I would be
11:54
Speaker 1: remiss if we didn't talk a little bit about that
11:57
Speaker 1: unpleasantness last year. So let's let me fire a few
11:59
Speaker 1: questions is about this and I'll ease into it. Um.
12:04
Speaker 1: And this is a question actually came from Twitter, which
12:07
Speaker 1: was you're reputed to be a tough guy to work for?
12:11
Speaker 1: True false? Um, you know, in some ways, but because
12:15
Speaker 1: a leader has to be exacting. I mean, this is
12:18
Speaker 1: a business of money, of dollars and cents, and mistakes
12:22
Speaker 1: can be very costly. And if you don't have a
12:25
Speaker 1: leader looking out for mistakes and berating those that make
12:30
Speaker 1: significant mistakes, then what have you? You've got a loose
12:34
Speaker 1: company that ultimately is not doing a service to its clients.
12:38
Speaker 1: So you know, I was always a stickler in terms
12:40
Speaker 1: of details, a stickler in terms of holding me needs
12:43
Speaker 1: and communication and going over the strategy. Um. You know,
12:48
Speaker 1: I thought that that was important. I thought that was
12:49
Speaker 1: my duty to clients to get it right. And so
12:53
Speaker 1: if they consider that to be an attitude, I guess rightly. So.
12:58
Speaker 1: On the other hand, I'm a pretty quiet guy. Um.
13:02
Speaker 1: I liked to, uh to sort of sit there and
13:05
Speaker 1: look at my Bloomberg screens and and do trades. And
13:09
Speaker 1: when it came to twelve o'clock hour, we would have
13:12
Speaker 1: an investment committee for two and a half hours, so
13:15
Speaker 1: that that would be my time to come together with
13:17
Speaker 1: the company. Uh you know. I I viewed myself as
13:22
Speaker 1: in many cases a mouse as opposed to a lion.
13:26
Speaker 1: Um in a mouse that sometimes roared, as opposed to
13:30
Speaker 1: a lion that, uh you know, was was constantly on
13:34
Speaker 1: the prowl. So yeah, I I tough but fair? Is
13:37
Speaker 1: that what you're sort of hinting at? Or I think so?
13:41
Speaker 1: I think I think a leader has to be tough.
13:43
Speaker 1: If if you sit around a table and you congenially, um,
13:49
Speaker 1: you know, look for a consensus, uh type of type
13:53
Speaker 1: of outcome, you're in trouble. You can't manage money. You
13:56
Speaker 1: can't manage money that way. At some point somebody has
13:59
Speaker 1: to step in and said, we're going in this direction
14:02
Speaker 1: and Uh, I studviewed that as as my job, and
14:05
Speaker 1: I think I did it well. So Alians bought PIMCO
14:09
Speaker 1: in nine for I think it was about five point
14:14
Speaker 1: nine billion. Am I getting those numbers more or less? Right?
14:17
Speaker 1: You hung around for another fifteen years, which is very
14:20
Speaker 1: unusual in the world, certainly of technology, when when the
14:24
Speaker 1: founders are bought out, they tend to go on to
14:27
Speaker 1: the next thing. But you stayed at PIMCO and managed
14:30
Speaker 1: it for another fifteen years. How did that happen? They
14:34
Speaker 1: pretty much left you free reign to do what you wanted.
14:38
Speaker 1: They did, and and it Uh. First of all, I
14:41
Speaker 1: gave them my promise, not for fifteen years, but uh,
14:45
Speaker 1: you know, for a certain long period of time that
14:47
Speaker 1: I'd stick around. At the time, I was only hive
14:51
Speaker 1: so and you were the brand. You were the most
14:54
Speaker 1: recognizable guy, right, So I gave them a promise. I
14:57
Speaker 1: remember earlier ten years before, a Japanese company had come
15:00
Speaker 1: by and they've been worried about what they called the
15:03
Speaker 1: black box. They didn't know what was in the box.
15:05
Speaker 1: And you know, if if Gross ever left, what was
15:07
Speaker 1: in the box? Um? And and so I told all
15:10
Speaker 1: the answer, Yeah, that was it was good to go
15:13
Speaker 1: and for a good number of years. Um, and I
15:17
Speaker 1: you know, I fulfilled that that promise for them and
15:22
Speaker 1: and for myself. You know, I still want to manage
15:25
Speaker 1: money and so um uh. You know, it wasn't strange.
15:29
Speaker 1: I wasn't motivated ever by money. It's nice to have money.
15:33
Speaker 1: It's nice to have a nice home or two, uh,
15:36
Speaker 1: and to have the privilege of not worrying about, you know,
15:41
Speaker 1: wearing next paychecks coming. But it was never money that motivated.
15:44
Speaker 1: It was always, um, it was always clients and the
15:51
Speaker 1: recognition from them that I was doing a good job.
15:56
Speaker 1: That's what I always always working for and still am
15:59
Speaker 1: so when so full disclosure for those of you who
16:03
Speaker 1: are listening. I had written a column last year about
16:09
Speaker 1: the bonus structure at PIMCO, which you responded to by saying, thanks,
16:13
Speaker 1: now I got to get a bodyguard for you revealing
16:15
Speaker 1: all that, But you challenged the track record of I
16:23
Speaker 1: had mentioned in the article that the two thousand and
16:26
Speaker 1: eleven total return never return, never recovered. You challenge that,
16:30
Speaker 1: and it turned out it did recover. The track record
16:33
Speaker 1: wasn't as people had said. But what struck me as
16:37
Speaker 1: quite fascinating was you directed me to look at the
16:40
Speaker 1: closed end funds you were managing, and the people at
16:43
Speaker 1: morning Star could not stop gushing. You know, they said, well,
16:48
Speaker 1: total Return has had a great track record. It's not
16:51
Speaker 1: in the top decile in the past couple of years,
16:53
Speaker 1: but these closed end funds were ranked one to three,
16:57
Speaker 1: four and six, five of the five of the top
17:00
Speaker 1: six in the entire peer group, they were ninety ninercentile.
17:05
Speaker 1: It raises a question, why not say, hey, you guys,
17:09
Speaker 1: take over total Return. It's too big for me. I'm
17:12
Speaker 1: happy to just run. Um, I'm happy to just run
17:15
Speaker 1: the closed end funds. Why not? UM? I guess you
17:22
Speaker 1: should have been my agent. Um that because by Barry
17:26
Speaker 1: the truth be told, and you're looking for some truth here. Um,
17:29
Speaker 1: that's exactly what I did say. UM. I said, if
17:33
Speaker 1: for some reason, you're dissatisfied with me from the standpoint
17:36
Speaker 1: of personality, here from the standpoint of business direction, if
17:41
Speaker 1: you think you want to pursue a different direction as
17:45
Speaker 1: opposed to you know what I called burgers and bonds,
17:49
Speaker 1: the plane vanilla total return type of product. Uh, then fine, Um,
17:54
Speaker 1: you know I'll I'll step down from the executive committee
17:59
Speaker 1: from a compensation committee and just manage the closed in funds. Uh.
18:05
Speaker 1: You know, I I love I love that area because
18:09
Speaker 1: it's an area where individuals can buy them, you know,
18:12
Speaker 1: for a ten dollar ticket with the Schwab or whoever
18:16
Speaker 1: their broker is. And uh. And you know, if they
18:19
Speaker 1: can find a good one like the ones you mentioned, Uh,
18:23
Speaker 1: you know, they can profit enormously in the bond work.
18:26
Speaker 1: And so I said, hey, I'd be willing to do that.
18:28
Speaker 1: But for some reason, still unbeknownst to me, they didn't
18:34
Speaker 1: think that was a good idea, and they they did
18:37
Speaker 1: fire me. Barry did Now, you technically quit before they
18:40
Speaker 1: fired you, but you knew it was coming. You said
18:42
Speaker 1: I'm getting out before they formally. Did you not have
18:45
Speaker 1: an inkling this was coming? That this blind side you well?
18:49
Speaker 1: And you know, I'd have to say in the last
18:53
Speaker 1: few weeks that it blindsided me. I had no idea
18:56
Speaker 1: that an executive committee could fire a founder and the
19:02
Speaker 1: titular leader of the of the company. UM. I found
19:07
Speaker 1: out about two months later. I was visiting a neighbor
19:10
Speaker 1: who was sick and he's eighty years old now and
19:12
Speaker 1: he's a retired Air Force general. But we had a
19:16
Speaker 1: nice discussion about his situation, and then I was as
19:19
Speaker 1: I was leaving, he said, well, he said, you should
19:21
Speaker 1: have come to see me six months ago. And I said,
19:23
Speaker 1: what was that, General? And he said, because I could
19:26
Speaker 1: have told you the first rule of the military. And
19:29
Speaker 1: I said, what's up? And he said, what's your back? Lieutenants. Yeah,
19:34
Speaker 1: a lot a lot of guys got fragged right back
19:36
Speaker 1: in the in the old days. Um so now you're
19:40
Speaker 1: now you're a janice. You're running an unconstrained fund. Obviously
19:44
Speaker 1: much different. Are you doing anything different? Not from an
19:49
Speaker 1: asset management perspective, but from a business perspective, from an
19:54
Speaker 1: interacting with colleagues perspective. What sort of mark did PIMCO
19:59
Speaker 1: leave on you? Are you changing anything or is it? Hey,
20:02
Speaker 1: it's a different world. It's a reboot and I'm going
20:04
Speaker 1: to do what I do best well at the end.
20:07
Speaker 1: Constraint is different. I was I was running unconstrained Pimpco.
20:09
Speaker 1: But unconstrained allows you to uh it to be long
20:13
Speaker 1: and to be short. I suppose it's not a hedge fund.
20:16
Speaker 1: It's not highly levered, but you know it does has
20:19
Speaker 1: flexibility and it it's not duration or maturity focused like
20:24
Speaker 1: the total return product. It is, as you've just pointed out,
20:29
Speaker 1: much smaller at two billion. It does allow a lot
20:32
Speaker 1: more flexibility. It does permit, uh, you know, the incorporation
20:37
Speaker 1: of an idea that can't really be traced by the
20:41
Speaker 1: street or or jumped in front of And so for
20:44
Speaker 1: all those reasons, it's it's it's it's a much more
20:48
Speaker 1: manageable situation. It is smaller. Um. You know, Janis has
20:53
Speaker 1: a large operation in Denver. I use their credit research
20:57
Speaker 1: uh team. As a matter of fact, I'm going to
20:59
Speaker 1: recommend one of their bond funds at at Barrens in
21:04
Speaker 1: just a few hours at the roundtable, five star funds.
21:07
Speaker 1: So they've got you know, excellent credit research that I utilize. UM. Yeah,
21:13
Speaker 1: they're not as advanced in terms of derivatives. Uh, and
21:18
Speaker 1: we'll bring that up to speed. We've we've got Myron
21:21
Speaker 1: Shoals by the way, uh and uh you know several
21:24
Speaker 1: other people that are really advanced in terms of uh
21:28
Speaker 1: obviously derivative thinking and exposure. And so you know, the
21:32
Speaker 1: attempt is not to rebuild PIMCO two. I don't want
21:37
Speaker 1: to have twenty one floors, uh, you know, right next
21:40
Speaker 1: to the PIMCO building, but but certainly to to build
21:43
Speaker 1: a structure that adds value for clients. And that that's
21:48
Speaker 1: the biggest concern very I got at the moment, is
21:50
Speaker 1: that with return so low and with with fees doing
21:54
Speaker 1: what they're doing not coming down very much, maybe in
21:57
Speaker 1: the hedge fund world to some extent it um you know,
22:01
Speaker 1: I I I worry about the plight of the investor
22:05
Speaker 1: and uh, you know, if they can only earn three
22:08
Speaker 1: or four percent annulate, um, I think they need a
22:11
Speaker 1: good deal. Uh maybe not Roosevelt's new deal, but they
22:15
Speaker 1: need a good deal and you know, I hope to
22:17
Speaker 1: bring that to them through Janis. So anything you've learned
22:21
Speaker 1: personally in terms of the business side, the interpersonal relations side,
22:26
Speaker 1: do you watch your back? You mentioned what do you
22:29
Speaker 1: take away from the the exit to to the new gig? Yeah,
22:34
Speaker 1: I think that although although no, I'm not going to
22:36
Speaker 1: be in a position. I told Dick Weyle, who who's
22:39
Speaker 1: the CEO at Janis that you know, he's running the business.
22:43
Speaker 1: I don't want to be part of those committees. I
22:45
Speaker 1: just want to manage money, um. And so that aspect
22:48
Speaker 1: is is out of the picture, and I'm not sure
22:51
Speaker 1: there's uh uh too many people have got to watch
22:54
Speaker 1: behind my back. I think Dick has my back in
22:57
Speaker 1: terms of a strong wind behind me and so um,
23:02
Speaker 1: you know a lot of confidence there. But you know,
23:05
Speaker 1: I think that was my big mistake at PIMCO, as
23:08
Speaker 1: I simply assumed that, uh that executives cannot be so
23:16
Speaker 1: uh stupid as to to do what they did. So
23:20
Speaker 1: let's in the last few minutes we have because I
23:22
Speaker 1: know you gotta get to barons. We have to get
23:24
Speaker 1: you out of here in ten minutes. Let me go
23:26
Speaker 1: to Twitter and fire some Well, this will be the
23:29
Speaker 1: rapid round part. I'll go to the favorite questions that
23:32
Speaker 1: had come up from Twitter. Here's one from George Caracas.
23:36
Speaker 1: What are two or three interests or activities unrelated to
23:39
Speaker 1: investing that have influenced your approach to investing. We obviously
23:43
Speaker 1: talked about about blackjack. What else? Well, I think stamps
23:47
Speaker 1: did um really yeah? And and bonds influence stamps but
23:52
Speaker 1: uh yeah. When I started collecting stamps, I took the
23:56
Speaker 1: the approach of each uh press a stamp, the value
24:02
Speaker 1: of ones having a provenance much like a money painting
24:07
Speaker 1: um or a picasso, and I tracked them in time
24:10
Speaker 1: for you know, the last century in terms of their
24:13
Speaker 1: sales prices and auction prices, much like uh, you know,
24:16
Speaker 1: going back in terms of the FED and looking at
24:18
Speaker 1: historic interest rates where they bottomed in World War Two, UH,
24:22
Speaker 1: caps and UH and monetary policy and all of that.
24:25
Speaker 1: And so I took a historic approach to two stamps
24:29
Speaker 1: and tracked the progress of prices up and down during
24:32
Speaker 1: recessions and recoveries, etcetera, etcetera, and uh, I think became
24:37
Speaker 1: a real good buyer of stamps at the right price.
24:41
Speaker 1: Problem with stamps is, how do you know what a
24:43
Speaker 1: little piece of papers worth? It's the same thing as
24:45
Speaker 1: that with a Picasso. How do you know what what
24:48
Speaker 1: a you know, a picture of you know, Picasso's blond
24:55
Speaker 1: haired girlfriend looks like, uh, what is it worth? Um?
24:59
Speaker 1: It's worth what you're willing to pay for it. But
25:01
Speaker 1: there is a there's a fundamental basis for it all
25:04
Speaker 1: in and the basis is is the growth of GDP
25:08
Speaker 1: and the growth of growth of wealth over time. And
25:11
Speaker 1: so I applied that the stamps as well, and did
25:13
Speaker 1: did pretty well. You were you were on CBS Sunday morning.
25:17
Speaker 1: You have one of the only one of the few
25:19
Speaker 1: complete collections of U S stamps US American stamps around
25:24
Speaker 1: is that? Is that accurate? The only one ever ever? Ever.
25:30
Speaker 1: So here's a question from Jim Arnold's in two parts,
25:33
Speaker 1: what are your thoughts of the impact of China on
25:35
Speaker 1: the future of money management? And do you need an intern? Yeah,
25:40
Speaker 1: I think he's volunteer. So so China and the impact
25:43
Speaker 1: of money management, well, I think significant in terms of uh,
25:50
Speaker 1: you know, China's growth and UH, China's um currency position,
25:57
Speaker 1: whether they want the the reman be to to appreciate
26:01
Speaker 1: or to gradually depreciate like it has in the last
26:05
Speaker 1: three four or five weeks, and what they intend to
26:07
Speaker 1: do ultimately with all of their treasuries. UM. You know.
26:12
Speaker 1: It used to be the a sense bury of the
26:15
Speaker 1: bond vigilantes, the pimcos of the world. Where the vigilantes,
26:18
Speaker 1: the real vigilantes these days are China and Japan, UH,
26:22
Speaker 1: and UH the Russia in a small way. They they
26:26
Speaker 1: can move markets and and so yeah, the impact of
26:29
Speaker 1: China going forward not just in terms of what they
26:33
Speaker 1: hold in terms of their reserves, but there the monetary
26:37
Speaker 1: um organization that they're trying to create as a counter
26:41
Speaker 1: influence to the I m f uh. You know, trying
26:45
Speaker 1: to combine Brazil and South American countries and other Asian
26:49
Speaker 1: countries as a counter balance and a counterweight. Um, you know,
26:53
Speaker 1: all that will be significantly important in terms of the
26:57
Speaker 1: balance of the world and who controls uh the gold
27:01
Speaker 1: so speak. Here's an interesting question from Charles Biello. Uh
27:06
Speaker 1: in in the era of negative interest rates and QE,
27:09
Speaker 1: do the textbooks on bond math and net present value
27:13
Speaker 1: need to be rewritten? Um? You know, I don't think so.
27:21
Speaker 1: It is fascinating and studying to to see negative interest rates,
27:25
Speaker 1: something that two years ago I would theoretically have said
27:29
Speaker 1: couldn't happen. But you know, the fact is at the
27:32
Speaker 1: moment in Europe, investors are willing to pay the government
27:35
Speaker 1: to hold their money. UM. I suppose that's the same
27:38
Speaker 1: concept as putting precious stones in a vault and paying
27:43
Speaker 1: a price in order to do that. But yeah, I
27:48
Speaker 1: don't think you have to to over ruled Macaulay and
27:53
Speaker 1: duration a considerations that you know, the mathematics will always hold. Uh.
27:59
Speaker 1: The question is how or below zero could we practically go?
28:02
Speaker 1: And I I don't think we can go practically much
28:05
Speaker 1: below zero Before the mattress as opposed to the euro
28:10
Speaker 1: or or even the dollar become a dominant consideration. Ultimately,
28:14
Speaker 1: you can you can just put your money in a
28:16
Speaker 1: mattress and not pay a fee. In the last two minutes,
28:19
Speaker 1: three quick questions. One comes from Kurt Marco. What do
28:24
Speaker 1: you contribute your success to? What's the most important attribute
28:28
Speaker 1: or experience for that success? Oh? I I think it's
28:36
Speaker 1: you know, putting the focus on on the client as
28:39
Speaker 1: opposed to, um, you know, the company or on yourself personally.
28:44
Speaker 1: If you always focus in terms of what they require,
28:49
Speaker 1: the risk that you're taking for them, the fact that
28:53
Speaker 1: you know the protection of their principle is the critical
28:57
Speaker 1: element in terms of what you're doing and knowing that, uh,
29:01
Speaker 1: you know, ultimately the investors success is your success. I
29:07
Speaker 1: think that's that's the critical focus. So last question, given
29:13
Speaker 1: your age and your accomplishments, why not just kick back
29:16
Speaker 1: and retire? Why keep working and working so hard? Well?
29:19
Speaker 1: I could have done that, but you know, I thought
29:22
Speaker 1: about it in terms of, you know, a game of
29:23
Speaker 1: basketball where you're shooting hoops for your own pleasure and
29:27
Speaker 1: they go in or they don't go in, and uh,
29:30
Speaker 1: it's fun, but it's it's much more fun to play
29:33
Speaker 1: a game of horse with somebody else. They got an age.
29:36
Speaker 1: You gotta know they gottat. Are you gonna l uh?
29:39
Speaker 1: You know it's a it's a game of competition as
29:42
Speaker 1: opposed to simply play in a game. And I could
29:45
Speaker 1: have played the game, but I want to beat the
29:46
Speaker 1: pants off of the competition like I have for the
29:50
Speaker 1: past thirty or thirty five years. I want to prove
29:52
Speaker 1: that it seventy that I haven't lost my touch, and
29:55
Speaker 1: that PIMCO was wrong and letting me go. And so
29:58
Speaker 1: for all those reasons, I'm here and expect to be
30:01
Speaker 1: around for a while. Bill, Thank you so much for
30:04
Speaker 1: spending so much time with us. This has been an
30:06
Speaker 1: absolute pleasure. I appreciate um you sitting with us for
30:11
Speaker 1: two hours. We've been speaking to Bill Gross, who runs
30:14
Speaker 1: the Young Constrained Funds at Janice, formerly of PIMCO. Thank
30:19
Speaker 1: you so much for coming in. Thank you, Barry boy,
30:21
Speaker 1: it's been a short two hours. Yeah, for sure. You're
30:24
Speaker 1: listening to Masters in Business with Barry rid Holts on
30:27
Speaker 1: Bloomberg Radio.