Bill Gross just appeared on CNBC to crush the rumor that Pimco was diminishing its exposure to Lehman Brothers either by reducing its trading positions with Lehman or reducing any investment in Lehman. In his comments he said that Pimco’s willingness to continue to deal with Lehman Brothers and other potentially troubled securities firms is influenced by the Federal Reserve’s “temporary” broker-dealer discount window.
Gross said that the discount window takes away any solvency risk on the part of Lehman, although he said that doubts about the business model of investment banks is most likely depressing Lehman’s price. The reduction of leverage across Wall Street and the decline of businesses that were, in essence, dependent on a booming real estate market and attendant mortgage boom has raised serious questions about the future profits of investment banks.
Comments (24)
Leave a comment
You can log in with your account or comment as a guest below.
test
Anyone else find Bill Gross mildly disturbing to look at??
Completely objective guy.
@1:44 – completely agree. True humanitarian who would never talk his book on TV for personal gain.
@1:36 — Mildly? The guy is downright creepy. Guess it wasnt quite noon in CA though. He did get awfully perky when the chickadee who visited his trading floor piped in with a question.
It was post yoga for the Bond Guru. Everyone looks a bit creepy stepping back into the office post-samadhi bliss.
Bill G had some work done that seriously went wrong.
Nobody talks about it, but its the elephant in the room whenever he appears in public.
Just look at past issues from Barrons Roundtable. About two years ago he changed from Surfer Boy to Freddie Krugar.
I think he looks like Brian Hunter.
Bet BH’s gils are tighter though.
Gross’s face haunts my nightmares
While I very much aprreciate the posts on the man’s looks, maybe it might be better to consider his words. Did he not say they continue to trade with Lehman because the Fed will back them up? Listen closely and you will hear the pounding of another nail in the coffin of LEH. The true test of the Fed’s credibility will come not in the saving of the next firm, but in its orderly liquidation.
I agree with Gross that the Fed probably won’t let Lehman fail. The problem is the logical implications of the “reality” are frightening:
Assumption: The Fed won’t let Lehman fail.
Implications: LEH’s counter-party risk is now, theoretically, nothing. LEH’s credit swaps should shrink to zero. It’s now safer to trade with Lehman than other banks.
Lehman, with nothing to lose and 100′s of billions in fed capital behind it, can now engage in a freely whatever reckless investment strategy it chooses to redeem its maligned directors.
Woo hoo!!! A world without moral hazard.
@2:45
Which is exactly why Gross is off base. Seems the market thinks so as well. And something tells me Einhorn is not ready to cover. If LEH thinks the Fed will save them from hell, they will look with envy at the $2 original price for BSC.
@ 2:40 & 2:45 – the Fed made their bed w. this – now they (and the American taxpayer) must lay in it – what a joke -can I get my Etrade acct. classified as a BD so I can levy up my portfolio and speculate on currency futures
Gross is damning LEH with faint praise.Sounds like if he had his druthers, he would be indifferent to the fate of LEH,but he’ll do business with them only because of the Fed backstop.
Did anyone else find it suspect that Gross took a good 3 minutes to give a straight answer about whether PIMCO had reduced exposure? He kept side-stepping it and had to be asked by 3 different interviewers before saying anything other than PIMCO maintians some sort of relationship with LEH. What was going on there?
@2:57
You can bet the Fed will not guarantee the survival of every firm on the street. Yes, it would have been cheaper to let BSC go down, but they were not prepared for the evaporation of the firm over the course of a weekend. Remember the time frame went from 30 days to the Tokyo opening that Sunday afternoon. Surely the Feds know most of the picture concerning LEH’s books by now. It’s sort of like fighting a flood, if you’ve ever worked the sandbag line. Once the levee was breached (BSC) you have to next decide what you can hold. There gonna have to let LEH go under, and try and hold the line at Merrill, otherwise they could lose both.
Took me a minute, but the obvious interpretation of Gross’ comment is LEH is worthless on its own.
Yea, your right. When a bank gets to the point where a big customer has to come out and say the Fed will not let it fail the trust has gone. All banks/money is built on trust. Bye bye LEH. (Where did I learn all this?)
uh, dow 5000
gross is a jackass
Sorry. Usually I don’t comment on someone’s looks, but Bill Gross was odd. The botched plastic surgery explains his face, but what explains his voice? A strange mix of Warren Jeffs and Michael Jackson.
In terms of what he was saying, I think he was willing to go on camera to stop the rumors, but in the middle of the interview started to wonder what in the world he had gotten himself in to.
Is Lehman “worth” anything right now? Get ready for another weekend surprise. Question is, Who will get stuck with Lehman?
Goldman Brothers?
JP Bealehcoviase
Maybe they can start creating names like law firms for these banks as they all merge
Morgan, Chase, Bear, Lehman, Wachovia & Co., L.P.